Extensions of the CVP Model—Semifixed (Step) Costs Cesar’s Bottlers bottles soft drinks in a factory 1 answer below »

Extensions of the CVP Model—Semifixed (Step) Costs

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 $2 per case bottled and the variable cost of $0.90 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

Total Fixed Costs

 

(Number of Cases Bottled)

per Day

1 Shift

(0–2,000)

$1,980

2 Shifts

(2,001–3,600)

3,740

3 Shifts

(3,601–5,000)

5,170

Required

a. Calculate the break-even point(s).

b. If Cesar’s Bottlers can sell all the units it can produce, should it operate at one, two, or three shifts? Support your answer.