Answer:
a. The​ break-even quantity in units for manual process= 26,786 bags
b. $80,358
c. 36,000 bags
d. $108,000
e. $53,000
f. $58,000
g. 26,786 bags
h. mechanized process, manual process.
Explanation:
a. Using the formula
Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)
= $ 37, 500Ă·$3- $ 1.60
=26,786
b. Using the formula
Break-Even Point (sales dollars) = Fixed Costs Ă· Contribution Margin
where Contribution Margin = Price of Product – Variable Costs
=37, 500Ă·($3- $ 1.60)
=26,786 x $3= $80,358
c. Using the formula
Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)
= $ 72,000Ă·$3- $1
=36,000 bags
d. Using the formula
Fixed Costs Ă· Contribution Margin
where Contribution Margin = Price of Product – Variable Costs
= $ 72,000Ă·($3- $1)
=36,000 bags x $3= $108,000
e. 65,000 bags x $3-$1.60= $91,000-$37,500 (manual process fixed cost)
= $53,000
f. 65,000 bags x $3-$1= $130,000-$72,000 (manual process fixed cost)
= $58,000
h. The mechanized process option should be chosen as this would bring more returns if the demand exceeds the point of​ indifference and the manual process if the demand stays below the point of​ indifference.