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Managerial Decision Making - CVP Analysis

A distributor of pre-washed shredded lettuce is opening a new plant and considering whether to use mechanized process or manual process to prepare the product. The manual process will have a fixed cost of $43,400 per month and a variable cost of $1.80 per 5-pound bag. The mechanized process would have a fixed cost of $84,600 per month and a variable cost of $1.30 per bag. The company expects to sell each bag of shredded lettuce for $2.50.

(a)Find the break-even point for each process.

(b)What is the monthly profit or loss if the company chooses the manual process and sells 70000 bags per month?

Solution Summary

Solution depicts the steps to calculate BEP and monthly profit in the given case.

$2.19