g company buys a variety of fruits from growers and then processes the fruit into a product line of fresh fruit, juices and fruit flavorings. the most recent year’s sales revenue was $4,200,000.

Project Description:

g company buys a variety of fruits from growers and then processes the fruit into a product line of fresh fruit, juices and fruit flavorings. the most recent year’s sales revenue was $4,200,000. variable costs were 60 percent of sales and fixed costs totaled $1,300,000. garden company is evaluating two alternatives designed to enhance profitability.
• one staff member has proposed that garden company purchase more automated processing equipment. this strategy would increase fixed costs by $300,000 but decrease variable costs to 54 percent of sales.
• another staff member has suggested that garden company rely more on outsourcing for fruit processing. this would reduce fixed costs by $300,000 but increase variable costs to 65 percent of sales.

required:
please assist garden company management by answering the following questions:
a. what is the current break-even point in sales dollars?
b. assuming an income tax rate of 34 percent, what dollar sales volume is current required to obtain an after-tax profit of $500,000.
c. in the absence of income taxes, at what sales volume will both alternatives
(automation and outsourcing) provide the same profit?
d. briefly describe one strength and one weakness of both the automation and the outsourcing alternatives.
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Price Type: Negotiable

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