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Keep It Loose, Keep It Tight, LLC manufactures hair ties. It most popular product, Untangled, is in high demand. The company currently sells a
Keep It Loose, Keep It Tight, LLC manufactures hair ties. It most popular product, Untangled, is in high demand. The company currently sells a pack of two hair ties direct to its customers for $10.00. Currently, the facility used to manufacturer the product is operating at full capacity, producing 5,000 packs of hair ties a month. Information related to the production and sale of a pack of hair ties at the current operating level is as follows: unit variable cost unit fixed cost $3.00 $1.75 A manufacturing facility has been located and can be rented for $1,000 per month if additional production capacity is needed to fill demand. This facility will allow for the production of up to an additional 3,000 packs of hair ties a month. The unit variable costs in the facility will increase by $0.50 per pack manufactured. A production supervisor, paid a monthly salary of $625, would be hired to oversee production in the additional facility. Which of the following statements is incorrect? A. If production falls below 10,000 hair ties a month, the unit fixed cost in the current manufacturing facility would increase. B. The monthly breakeven point in the rented facility is 250 packs of hair ties. C. To make a monthly target profit of $30,000, a total of 5,827 packs of hair ties must be produced and sold. D. At it's current operating level, the company's profit from the sell of hair ties is $26,250. OE. The maximum monthly operating income that the company could make with the two facilities is $98,625.
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