The Timber Lumber Company was formed in 1986 by Bill Peterson, John Carlson and Rick Santos and is located in Seattle, Washington. The company has hired an industry and government relations executive by the name of Paul Denunzio who has been keeping close tabs on congressional activities in the timber industry.

With the possibility of the US Congress relaxing restrictions on cutting old growth forests, Timber Lumber Company is considering an expansion of its facilities. The company believes it can sell lumber for $0.18 per board foot. A board foot is a measure of lumber. The tax rate for the company is 34.5%. The company is presented with the following four independent opportunities:

Build factory A with annual fixed costs of $22 million and variable costs of $0.10 per board foot. The factory has an annual capacity of producing 500 million board feet.

Build factory B with annual fixed costs of $11 million and variable costs of $0.12 per board foot. The factory has an annual capacity of producing 300 million board feet.

Build factory C with annual fixed costs of $14 million and variable costs of $0.11 per board foot. The factory has an annual capacity of producing 400 million board feet.

Required:

What is the break-even point of production in board feet for factory A, B, and C?

If the company desires to generate a before tax profit of $1.5 million with factory A, how many board feet would the company have to process and sell?

If the company desires to generate an after tax profit of $2.5 million with factory A, how many board feet would the company have to process and sell?