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CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product
CVP Analysis and Special Decisions
Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $ Variable costs were percent of sales and fixed costs totaled $ Sweet Grove is evaluating two alternatives designed to enhance profitability.
One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $ but decrease variable costs to percent of sales.
Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $ but increase variable costs to percent of sales.
Round your answers to the nearest whole number.
a What is the current breakeven point in sales dollars?
$
Answer
b Assuming an income tax rate of percent, what dollar sales volume is currently required to obtain an aftertax profit of $
$
Answer
c In the absence of income taxes, at what sales volume will both alternatives automation and outsourcing provide the same profit?
$
Answer
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