Question

​It’s Five​ O’Clock Somewhere, LLC manufactures beverage containers. The company is anxious to produce and sell a new beverage container designed to keep beverages cool for up to 2 hours. The container will sell for​ $3 each. Enough capacity exists in the​ company’s plant to produce​ 16,000 of the new containers each month. Variable costs to manufacture and sell one of the containers would be​ $1.25, and fixed costs associated with the container would total​ $14,400 per month. The​ company’s Marketing Department predicts that if demand for the new container exceeds the​ 16,000 containers that the company is able to produce in its current facility, additional manufacturing space can be rented from another company at a fixed cost of​ $1,000 per month. Variable costs in the rented facility would total​ $1.40 per​ unit, due to somewhat less efficient operations than in the​ company’s current facility. How many of the new beverage containers must be sold each month to make a monthly profit of?

Answer 1

Answer:Please refer to the explanation section

Explanation:

the question is incomplete the question does not specify how much profit is required, we will modify the question and add a $20000 as a required profit level, the new modified version of the question is  "how many of the new beverage containers must be sold each month to make a monthly profit of $20000?"

existing production Plant (16000)

Variable costs = $1.25

fixed costs = $14400

selling price $3

Profit from 16000 units = (16000 x 3) - $14400 - (16000 x 1.25)

Profit from 16000 units = 48000 - 14400 - 20000 = 13600

Profits from first Plant = $13600

Profits from production facility must be $6400 ($20000 - $13600).

Let the number of new units of beverages be x

new fixed cost = $1000

new variable costs = 1.40

3X - (1000 + 1.40X) = 6400

3X -1000 - 1.6X = 6400

1.6X = 6400 + 1000

X = 7400/1.6 = 4750

4750 New units must be sold to make a profit of $2000. total units 16000 + 4750 = 20750 units