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ITM 3060 Lab Exercise Four K. Pefkaros
Good Times Bottlers

Good Times Bottlers is a bottler of “pop” wines. This year the firm sold 180,000 gallons of wine in 630,000 bottles at a retail price of \$1.59 per bottle. Since capacity for the plant is 650,000 bottles, Good Times is operating very close to its production limit.

Analysis of prior data has yielded cost estimates for the coming year as follows:

Fixed Costs: Fixed Production \$ 75,000 General and Admin 115,000 Advertising 45,000 Interest 41,000 Depreciation 47,000

Variable Costs: Labor .37 per bottle Raw Materials .52 per bottle Bottle Hardware .14 per bottle

The general manager feels that the plant is operating at too low a level of profit and is considering alternatives to make the plant more profitable. He feels that the minimum acceptable return on sales (ROS) is 11%. (ROS is profit before tax (PBT) as a percent of sales.)

Determine PBT and ROS projections for the coming year assuming volume and price remain at this year’s levels.

Check Figures: PBT = \$29800 ROS = 2.975% or .0297

Lab Exercise Five
Good Times Bottlers - Interrogations

Given the model developed in the previous lab exercise, perform the following interrogations in order to advise the general manager of Good Times Bottlers.

1. Determine the breakeven point in bottles sold.

2. Determine the PBT and ROS at full capacity (Recall full capacity is 650,000 bottles)

3. Determine the selling prices necessary to obtain an ROS of 11% at full production.

4. Determine the breakeven point in bottles sold at this price.

5. What unit labor cost would be necessary to obtain an ROS of 11% at full production? (assuming a price of \$1.59)...

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