Sala Pipe Fittings Produce Pipe Elbows and Reducers from Stainless

question 5

Multiple Choice

Sala pipe fittings produce pipe elbows and reducers from stainless steel. The company can process up to 20 000 tonnes of stainless steel sheets in a year. The company pays the steel company $800 per tonne of stainless steel sheets and each tonne is used to manufacture $2000 worth of elbows and reducers. Variable processing costs are $470 per tonne and fixed processing costs $3.4 million per year at all production levels. Administrative overhead is $3 million per year regardless of the volume of the production. Marketing and transportation costs work out to be $230 per tonne. Determine the break-even volume in terms of percent capacity utilization.

• A) 30%
• B) 34%
• C) 43.8%
• D) 24.6%
• E) 64%

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