Question
A soft drink company prepares regular its bottle at a variable cost of $0.25 and some fixed costs. The market price of the drink is
A soft drink company prepares regular its bottle at a variable cost of $0.25 and some fixed costs. The market price of the drink is $2.5.
a) If 10 million bottles are sold per year with a profit of $20.25 million dollars, what are the fixed costs of the company? What is the minimum production level that the company will make a profit?
b) After some years the company modifies the design of the bottle which increases the variable cost by 10% and fixed cost also by 12%. If the company wants to maintain the same profit ($20.25 million) at the previous production level (10 million) what should be the minimum sale price?
c) If the company decides to increase the market price to $3.0 what will be their annual profit?
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Engineering Economy
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
15th edition
132554909, 978-0132554909
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