Cesar\'s Bottlers bottles soft drinks in a factory that can operate either one s

Question

Cesar's Bottlers bottles soft drinks in a factory that can operate either one shift, two shifts, or three shifts per day. Each shift is eight hours long. The factory is closed on weekends. The sales price of $10 per case bottled and the variable cost of $3 per case remain constant regardless of volume. Cesar's Bottlers can increase volume by opening and staffing additional shifts. The company has the following three choices:

Daily Volume Range (Number of Cases Bottled) Total Fixed Costs per Day

1 Shift (0–5,000) $ 32,000

2 Shifts (5,001–8,000) 29,000

3 Shifts (8,001–10,000) 36,000

Calculate the break even points for shifts 1,2,and 3(how many cases for all 3)?

Explanation / Answer

BEP = Fixed cost / Contribution per unit

1 Shift = 32000 / (10-3) = 4571 cases

2 Shifts = 29000 / 7 = 4143 cases

3 Shifts = 36000 / 7 = 5153 cases

BEP for all the three cases is 5153 cases.

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