Question

Cesar's Bottlers bottes soft drinks in a factory that can operate either one shift, Iwo shifts, or three shifts per day. Each shift is eight hours long. The factory is closed on weekends. The sales price of $2 per case bottled and the variable cost of $0.8 per case remain constant regardless of volume. Cesar's Bottlers can increase volume by opening and staffing additional shifts. The company has the following three choices: Daily Volume Range Total Fixed Costs per (Number of Cases Bottled) Day 1 Shin (0-2,000) $ 2,150 2 Shifts (2,001-3.600) 4,070 3 Shifts (3,601-6,000) 5,590 T Required: a. Calculate the break even point(s). (Round up your answers to the nearest whole number.) Break-even points 1 shin cases cases 3 hits co: OS b-1. Calculate the profit (or loss) for each alterative, assuming Cesar can sell all the cases he can bottle. (Loss amounts should be Indicated with a minus sign.) Profit (Loss) 2 shits 3 hits b-2. Should Cesar operate one, two or three shirts? 1sh 2 hits 3 hits 22 tv W X MacBook Pro esc 0 80 F3 000 DOO F4 . # $ %

Answer 1

Part 1	Computation of Break-even Point
	For 1 Shift: ($2,150 / $1.20)	1792	units
	For 2 Shifts : ($4,070 / $1.20)	3392	units
	For 3 Shifts : ($5,590 / $1.20)	4658	units
Part 2	Calculation of Profit at maximum bottles sold
		1 Shift(2000 units)	2 Shifts(3600 units)	3 Shifts(5000 units)
	Sales	$                         4,000	$                   7,200	$                  10,000
	Less:Variable Cost	$                         1,600	$                   2,880	$                    4,000
	Contribution Margin	$                         2,400	$                   4,320	$                    6,000
	Less:Fixed Cost	$                         2,150	$                   4,070	$                    5,590
	Net Profit	$                            250	$                      250	$                       410
Part 3	Since the Profit at 3 Shifts is highest, Hence it should produce in 3 shifts