Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

It's Five O'clock Somewhere, LLC manufactures beverage containers. The company is anxious to produce and sell a new beverage container designed to keep beverages cool

image text in transcribed

It's Five O'clock Somewhere, LLC manufactures beverage containers. The company is anxious to produce and sell a new beverage container designed to keep beverages cool for up to 2 hours. The container will sell for $3 each. Enough capacity exists in the company's plant to produce 14,000 of the new containers each month. $0.40 from every sales dollar is contribution margin. Fixed costs associated with the container would total $12.000 per month in the existing facility. The company's Marketing Department predicts that if demand for the new container exceeds the 14,000 containers that the company is able to produce in its current facility that additional manufacturing space can be rented from another company at a fixed cost of $2,000 per month. The rented facility has a production capacity of 8,000 units per month. The variable cost percentage in the rented facility would equal 70% due to somewhat less efficient operations than in the company's current facility. Which of the following statements is correct? O A. If the company produces less than 14,000 containers in its current facility, the total fixed costs will be less than $12,000. OB. The maximum monthly operating income that the company could make with the two facilities is $19,600. O C. The monthly breakeven point in the rented facility is greater than the monthly breakeven point in the existing facility. OD. To make a monthly target profit of $5,000, a total of 16,445 containers must be produced and sold. O E. As long as the company's monthly target profit is less than or equal to $5,200, it will not need to rent the additional facility

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of External Auditing

Authors: Brenda Porter, Jon Simon, David Hatherly

1st Edition

0471962120, 978-0471962120

More Books

Students also viewed these Accounting questions