Question
Sala pipe fittings produce pipe elbows and reducers from stainless steel. The company can process up to 20,000 tonnes of stainless steel sheets in a
Sala pipe fittings produce pipe elbows and reducers from stainless steel. The company can process up to 20,000 tonnes of stainless steel sheets in a year. The company pays the steel company $800.00 per tonne of stainless steel sheets and each tonne is used to manufacture $2,000.00 worth of elbows and reducers. Variable processing costs are $470.00 per tonne and fixed processing costs $3.4 million per year at all production levels. Administrative overhead is $3 million per year regardless of the volume of the production. Marketing and transportation costs work out to be $230.00 per tonne. In order to attain a net income of $2.4 million how many tonnes of steel must be processed this year?
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