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The 2021 income statement for Bjorgvin Salmon is presented below. Revenue (115,000 Kgs) Expenses Fish Preparation Materials Packaging Materials Direct Labor Administration Commissions Total
The 2021 income statement for Bjorgvin Salmon is presented below. Revenue (115,000 Kgs) Expenses Fish Preparation Materials Packaging Materials Direct Labor Administration Commissions Total expenses 253,000 28,750 39,100 320,000 160,000 11,500 812,350 920,000 income 107,650 The length of the fishing season is only three months, and the direct labor is related to seasonal employees that work in the summer. They are hired on an as needed basis REQUIREMENTS: 1) For the upcoming fishing season, the government has imposed fishing restriction because of low fish counts. As such, Bjorgvin Salmon will only be able to purchase and process 65,000 kilos. Administrative costs are only incurred if they buy and sell salmon Management has decided they will only operate if they can break-even. Should they operate? Remember to show your work and explain your solution. 2) Changing things up a bit, what if administrative expenses will continue regardless of whether they operate the production facility. Once again, management has decided they will only operate if they can break-even. Should they operate? Remember to show your work and explain your solution 3) Due to the shortage of salmon, prices are increasing If you assume that administrative expenses are incurred regardless of whether the production facility is operated, what would be the break-even price for Bjorgvin's Salmon? 4) Management is planning to use the preceding CVP analysis in their decision on whether to operate in the coming year. As such, what assumptions will they be making and relying on? How reasonable are these assumptions? 5) If Bjorgvin, the owner of Bjorgvin's Salmon comes to you to discuss the company's cost structure. Because of the significant production volume fluctuations, he is wondering if there is a way to reduce the risk of art operating loss. In a brief response, explain how the relation between fixed and variable costs will affect loss risk when you operate at levels that are close to the breakeven point
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1 To determine if Bjorgvin Salmon should operate for the upcoming fishing season with restricted fish counts Revenue at breakeven Total expenses Break...Get Instant Access to Expert-Tailored Solutions
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