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The KFUs Company is currently operating its mill six days a week, 2 4 hours a day, onthree shifts. At current prices, the company could
The KFUs Company is currently operating its mill six days a week, hours a day, onthree shifts. At current prices, the company could easily obtain a sufficient volume of sales totake the entire output of a seventh day of operation each week. The mills practical capacity is hundred weight of flour per day. Note that Flour sells for SAR a hundred weightcwt and the price of wheat is SAR a bushel. About bushels of wheat are requiredper cwt of flour. Fixed costs now average SAR a day, or SAR per cwt The averagevariable cost of mill operation, almost entirely wages, is SAR per cwt With Sundayoperation, wages would be doubled for Sunday work, which would bring the variable cost ofSunday operation to SAR per cwt Total fixed costs per week would increase by SAR or SAR if the mill were to operate on Sunday.a Using the information provided, compute the breakeven volumes for sixday and sevenday operation.b What are the marginal contribution rates for sixday and sevenday operation?c Compute the average total cost per cwt for sixday operation and the net profit margin percwt. before taxes.d Would it be economical for the mill to operate on Sundays?
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