Calculate the breakeven output quantities

Assignment Help Business Economics
Reference no: EM135588

Q. Hiro Nakamura is CEO of the Cola King Bottling Company, a small regional producer operating in the Pacific Northwest. Nakamura is considering two alternative expansion proposals:

1. Construct a single bottling plant in Phoenix, Arizona with a capacity of 40,000 cases per month, at a monthly fixed cost of $20,000 and a variable cost of $2.50 per case.

2. Construct 3 plants, 1 each in Phoenix, Arizona; Las Vegas, Nevada; and Albuquerque, New Mexico, with capacities of 15,000, 14,000 and 13,000 respectively; and monthly fixed costs of $11,000, $10,000 and $9,000 each. Variable costs would be only $2.30 per case due to lower distribution costs, but sales from each plant would be limited to demand within the home state. The total estimated monthly sales volume in the south western states, 37,000 cases, is distributed as: Arizona, 15,000 cases; Nevada, 14,000 cases; and New Mexico, 8,000 cases.

A. Using a wholesale price of $4 per case in each state, calculate the breakeven output quantities for each alternative.

B. Which alternative expansion scheme should Cola King follow?

C. If sales increase to production capacities, which alternative would prove to be more profitable?

Reference no: EM135588

Questions Cloud

Evaluate supplementary net income : Determine the 2004 ROI for each division and Rashid, manager of Division A, is supposing a proposal to invest 250 million rials for modern equipment.
Evaluate the amount of subscription revenue : Use the horizontal model to record the effects of the subsequent items Subscription fees received in advance in September 2010.
Industry significantly increases advertising expenditures : Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry.
Two alternative recreation projects : A county is considering using a piece of park land for one of two alternative recreation projects. Project S would require construction costs of $2 million (year 0) and generate net benefits of $1 million per year for 10 years.
Calculate the breakeven output quantities : Using a wholesale price of $4 per case in each state, calculate the breakeven output quantities for each alternative.
Values of the real interest rate : Find the equilibrium values of the real interest rate, consumption, investment, and the price level.
Reinvestment in the firm this year : MMM expects to generate $60,000 in earnings that will be retained for reinvestment in the firm this year.
Active policy recommend government intervention : Why do proponents of active policy recommend government intervention to close an expansionary gap. Some economists argue that only unanticipated increases in the money.
Determine the demand for money : Compare and contrast the way Classical and Keynesian theory determine the Demand for Money and how it is related to the Money Supply

Reviews

Write a Review

 

Business Economics Questions & Answers

  Elucidate the marginal revenue from the fourth worker

Elucidate the marginal revenue from the fourth worker

  Values of the real interest rate

Find the equilibrium values of the real interest rate, consumption, investment, and the price level.

  Elucidate new demand curve

Find the equilibrium price and quantity algebraically. If tourists decide they do not really like T-shirts that much, which of the following might be the new demand curve.

  Identify the major participants in the financial system

Analyze the USA financial meltdown that happened in 2008-2009. This crisis was partially caused by the reward systems that were in place for participants in the financial system. Identify the major participants in the financial system.

  Think of any financial innovation in the past ten years

Think of any financial innovation in the past ten years

  Active policy recommend government intervention

Why do proponents of active policy recommend government intervention to close an expansionary gap. Some economists argue that only unanticipated increases in the money.

  What occurs when a new technology makes another one obsolete

Explain what occurs when a new technology makes another one obsolete in terms of economic profit.

  Aggregate demand and supply

The vertical long run AS curve compatible with classical economics implies that AD only determines the price level

  What occurs when a new technology makes another one obsolete

Explain what occurs when a new technology makes another one obsolete in terms of economic profit.

  What are the annual accounting costs for the firm

What are the annual accounting costs for the firm described above? What are the annual explicit costs for the firm described above?

  The shift of the demand curve

Find the equilibrium price and quantity after the shift of the demand curve.

  Supply and demand diagrams

Explain each of the following using supply and demand diagrams,  With the use of a graph, explain how these two programs affect cigarette consumption and the price of cigarettes.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd