Rich Sawyer runs a landscaping firm. Each year Rich contracts for labor and equipment hours from a local construction company. Once Rich has chosen a capacity option, he cannot change it later. In addition, the cost for each capacity option is fixed. That is, Rich must pay for all labor and equipment hours he contracts for, even if he doesn't need them all. Therefore, there are essentially no variable costs. Rich also has information concerning the amount of revenue and the labor and equipment hours needed for the "typical" landscaping job. Finally, Rich has identified three possible demand levels and their associated probabilities. LOADING... Click the icon to view three different capacity options given Rich by the construction company.
LOADING... Click the icon to view the information concerning the amount of revenue and the labor and equipment hours needed for the "typical" landscaping job.
LOADING... Click the icon to view three possible demand levels.
a. Determine the total fixed costs and the break-even point for each capacity option. What is the maximum number of jobs that can be handled under each capacity option? Fill in the table below (enter your responses as whole numbers and round your response for the break-even point up to the next whole number).
Capacity Option
Labor Hours
Equipment Hours
Fixed Cost
Break-Even Point
Max. No. of Jobs
High capacity