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Zan Azlett and Angela Zesiger have joined forces to start A&Z Lettuce Products, a processor of packaged shredded lettuce for institutional use. Zan has years
Zan Azlett and Angela Zesiger have joined forces to start A&Z Lettuce Products, a processor of packaged shredded lettuce for institutional use. Zan has years of food processing experience, and Angela has extensive commercial food preparation experience. The process will consist of opening crates of lettuce and then sorting, washing, slicing, preserving, and finally packaging the prepared lettuce. Together, with help from vendors, they think they can adequately estimate demand, fixed costs, revenues, and variable cost per pound bag of lettuce. They think a largely manual process will have monthly fixed costs of $ and variable costs of $ per bag. A more mechanized process will have fixed costs of $ per month with variable costs of $ per pound bag. They expect to sell the shredded lettuce for $ per pound bag.
a What is the breakeven quantity for the manual process?
b What is the revenue at the breakeven quantity for the manual process?
c What is the breakeven quantity for the mechanized process?
d What is the revenue at the breakeven quantity for the mechanized process?
e What is the monthly profit or loss of the manual process if they expect to sell bags
of lettuce per month?
f What is the monthly profit or loss of the mechanized process if they expect to sell
bags of lettuce per month?
g At what quantity would Zan and Angela be indifferent to the process selected?
h Over what range of demand would the manual process be preferred over the mechanized
process? Over what range of demand would the mechanized process be preferred over the manual process?
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