The income statement for Sandhill Salmon Sales, which produces smoked salmon, follows:

Revenue (99,200 lbs)						$	694,400
Expenses
	Fish		$	158,720
	Smoking materials			19,840
	Packaging materials			29,760
	Labour (wages)			277,760
	Administration			178,560
	Sales commissions			9,920
Total expenses							674,560
Pretax income						$	19,840

Assume that the administrative costs are fixed and that all the other costs are variable.

Suppose the provincial government curtails fishing because of low fish counts. As a result, Sandhill Salmon Sales can buy only 49,600 lbs of salmon this year. Assume that the selling price, the fixed costs, and the variable costs remain the same as last year. Using only quantitative information, should Sandhill Salmon operate this year? Explain your answer, using calculations. (Hint: Before you begin, identify the type of non-routine operating decision, the decision options, and the relevant information for this decision.) (Round answer to 2 decimal places, e.g. 5.35.)

Contribution margin:

$ per lb salmon

If the fixed costs can be avoided by not producing, the company should notshould produce this year.

If the fixed costs can not be avoided by not producing, the company shouldshould not produce this year.

Assume that Sandhill Salmon can buy up to 68,720 lbs of fish at $1.60/lbs and that the remainder of the fixed and variable costs remain the same as last year. Also assume that the selling price remains the same as last year and that the market will purchase at least another 29,120 lbs of fish. If the managers of Sandhill Salmon wish to sell more salmon, what should they be willing to pay to purchase more fish? (Hint: This type of decision is different from the one in the previous part. Before you begin, identify the type of non-routine decision, the decision options, and the relevant information for this decision.) (Round answer to 2 decimal places, e.g. 5.35.)

Willing to pay:

$ per lb salmon