Reference no: EM132710367

Jane and Zack have joined forces to start J&Z Protein Products, a processor of packaged protein products for restaurants. Jane has years of food processing experience, and Zack has extensive commercial food preparation experience. The process will consist of opening bags of organic cashew, sorting, and packaging. Together, with help from vendors, they feel they can adequately estimate demand, fixed costs, revenues, and variable cost per 2-pound bag of cashew. They think a largely manual process will have monthly fixed costs of $75,000 and variable costs of $15 per 2-pound bag. A more mechanized process will have fixed costs of $150, 000 per month with variable costs of $10 per 2-pound bag. They expect to sell the cashew for $20 per 2-pound bag.

a. What is the break-even quantity for the manual process? What is the revenue at the break-even quantity for the manual process? Drawing a break-even plot showing break-even quantity and revenue/cost.

b. What is the break-even quantity for the mechanized process? What is the revenue at the breakeven quantity for the mechanized process? Drawing a break-even plot showing break-even quantity and revenue/cost.

c. What is the monthly profit or loss of the manual process if they expect to sell 75,000 2-pound bags of cashew per month? What is the monthly profit or loss of the mechanized process if they expect to sell 75,000 2-pound bags of cashew per month?

d. At what quantity would Jane and Zack be indifferent to the process selected? Draw a crossover chart showing crossover cost and quantity.

e. Over what range of demand would the manual process be preferred over the mechanized process? Over what range of demand would the mechanized process be preferred over the manual process?