Use the Following Information for Questions 10, 11 and 12

question 14

Multiple Choice

Use the following information for Questions 10, 11 and 12
A company that produces breakfast cereal using a highly automated packaging process has the following production and revenue alternatives for three products A, B, and C) that are feasible to produce with existing plant and equipment. Total revenue is in thousands of dollars per month. Total cost for the first shift is $90,000 per month - of which $60,000 is labor, $20,000 is other variable costs, and $10,000 is fixed cost. As the number of shifts is increased, fixed cost remains at $20,000 per month while variable costs other than labor remain the same per shift. For the second shift, labor must be paid 1.3 times the amount paid on the first shift. For the third shift, labor must be paid 1.5 times what it receives in the first shift.
-What is the total monthly cost if the firm uses three shifts?

• A) $138,000
• B) $185,000
• C) $215,000
• D) $298,000
• E) $365,000

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Definitions:

Wasted Capacity

The portion of production capacity that goes unused or is not effectively utilized.

Capacity Shortage

A situation where the demand for a product or service exceeds the available supply or production capability.

Peak Periods

Refers to times of highest demand or activity within a business or market sector, often requiring increased resources or capacity.

Off-Peak Periods

Times when demand for a service or product is lower, often leading to reduced prices or rates to encourage usage or purchase during these times.