Question

In: Finance

Oriole’s Candles will be producing a new line of driplesscandles in the coming years and...

Oriole’s Candles will be producing a new line of dripless candles in the coming years and has the choice of producing the candles in a large factory with a small number of workers or a small factory with a large number of workers. Each candle will be sold for $10. If the large factory is chosen, the cost per unit to produce each candle will be $3.00. The cost per unit will be $7.80 in the small factory. The large factory would have fixed cash costs of $2.5 million and a depreciation expense of $300,000 per year, while those expenses would be $560,000 and $100,000, respectively in the small factory.


Calculate the accounting operating profit break-even point for both factory choices for Oriole’s Candles. 

1. large factory break even? 

2. small factory break even? 

Solutions

Expert Solution


Related Solutions

Sunland’s Candles will be producing a new line of dripless candles in the coming years and...
Sunland’s Candles will be producing a new line of dripless candles in the coming years and has the choice of producing the candles in a large factory with a small number of workers or a small factory with a large number of workers. Each candle will be sold for $10. If the large factory is chosen, the cost per unit to produce each candle will be $3.00. The cost per unit will be $7.50 in the small factory. The large...
Two different designs on a new line of winter jackets for the coming winter are available...
Two different designs on a new line of winter jackets for the coming winter are available for your manufacturing plants. Your profit (in thousands of dollars) will depend on the taste of the consumers when winter arrives. The probability of the three possible different tastes of the consumers and the corresponding profits are presented in the following table. Probability Taste Design A Design B 0.2 more conservative 180 520 0.5 no change 230 310 0.3 more liberal 350 270 1)...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line of equipment in an effort to increase its market share.    The new production line will cost $850,000 for manufacturing the parts and an additional $280,000 is needed for installation. The equipment falls into the MACRS 3‐yr class, and would be sold after four years for $350,000. The equipment line will generate additional annual revenues of $600,000, and will have additional annual operating expenses of...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line of equipment in an effort to increase its market share. The new production line will cost $850,000 for manufacturing the parts and an additional $280,000 is needed for installation. The equipment falls into the MACRS 3‐yr class, and would be sold after four years for $350,000. The equipment line will generate additional annual revenues of $600,000, and will have Additional annual operating expenses of...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line of equipment in an effort to increase its market share.    The new production line will cost $850,000 for manufacturing the parts and an additional $280,000 is needed for installation. The equipment falls into the MACRS 3‐yr class, and would be sold after four years for $350,000. The equipment line will generate additional annual revenues of $600,000, and will have additional annual operating expenses of...
Gilmore Golf, Inc is considering producing and selling a new line of golf clubs. The clubs...
Gilmore Golf, Inc is considering producing and selling a new line of golf clubs. The clubs will sell for $690 per set and have a variable cost of $255 per set. The company has spent $250,000 for a marketing study that determined the company will sell 5,000 sets per year for 20 years. The marketing study also determined that the company will lose sales of 2,000 sets per year of its high-priced clubs, which currently sell for $1000 per set...
Tisla Motors needs to select an assembly line for producing their new SUV. They have two...
Tisla Motors needs to select an assembly line for producing their new SUV. They have two options: Option A is a highly automated assembly line that has a large up-front cost but low maintenance cost over the years. This option will cost $9 million today with a yearly operating cost of $2 million. The assembly line will last for 5 years and be sold for $5 million in 5 years. Option B is a cheaper alternative with less technology, a...
Gilmore Golf, Inc is considering producing and selling a new line of golf clubs. The clubs...
Gilmore Golf, Inc is considering producing and selling a new line of golf clubs. The clubs will sell for $690 per set and have a variable cost of $255 per set. The company has spent $250,000 for a marketing study that determined the company will sell 5,000 sets per year for 20 years. The marketing study also determined that the company will lose sales of 2,000 sets per year of its high-priced clubs, which currently sell for $1000 per set...
Ruff Motors needs to select an assembly line for producing their new SUV. They have two...
Ruff Motors needs to select an assembly line for producing their new SUV. They have two options: Option A is a highly automated assembly line that has a large up-front cost but low maintenance cost over the years. This option will cost $9 million today with a yearly operating cost of $2 million. The assembly line will last for 5 years and be sold for $5 million in 5 years. Option B is a cheaper alternative with less technology, a...
Exercise D8-19 Luis Herrera, an up-and-coming fashion designer, created a new line of men’s fashion socks...
Exercise D8-19 Luis Herrera, an up-and-coming fashion designer, created a new line of men’s fashion socks in response to the growing number of celebrities who are expressing their individuality by replacing traditional navy and black socks with brighter colors and bold patterns. At a sales price of $9.95 per pair, Luis estimates monthly sales volume will be 20,300 pairs. Variable product costs will be $6.30 per pair and fixed overhead will be $1.60 per pair. Half of the fixed overhead...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT