Good afternoon. you helped me a great deal in the past and I promised you more business. I need help with the following.
CVP Analysis and Special DecisionsSweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year’s sales rev-enue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,300,000.Sweet Grove is evaluating two alternatives designed to enhance profitability.• One staff member has proposed that Sweet Grove purchase more automated processing equip-ment. This strategy would increase xed costs by $300,000 but decrease variable costs to 54percent of sales.• Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit pro-cessing. This would reduce xed costs by $300,000 but increase variable costs to 65 percentof sales.Requireda. What is the current break-even point in sales dollars?b. Assuming an income tax rate of 34 percent, what dollar sales volume is currently required toobtain an after-tax profit of $500,000?c. In the absence of income taxes, at what sales volume will both alternatives (automation andoutsourcing) provide the same profit?d. Briefly describe one strength and one weakness of both the automation and the outsourcingalternatives.
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