Organic Strawberry Growers Provide Gourmet Organic Strawberries for Restaurants in the Local

Organic Strawberry Growers provide gourmet organic strawberries for restaurants in the local area. The income statement for last year follows (based on sales of 4,000 cases):
Income Statement for Last Year
Revenue $400,000
Costs:
Wages for pickers and packers $200,000
Packing materials 40,000
Lease of land and growing costs 50,000
Administration and selling 95,000
Inspection wages 10,000 395,000
Pre-tax income 5,000
Income taxes @ 30% 3,000
After-tax income $ 2,000
Pickers, packers, and inspectors are employed on an hourly basis and can be laid off whenever necessary. Salespeople mostly deliver the product and are paid on a salaried basis.
a)What is the cost function for Organic Strawberry Growers? Explain your assumptions about cost behaviour.
b)What is the breakeven point for this business?
c)What sales volume would be necessary for an after-tax profit of $5,000?
d)The manager believes that he can raise and sell 5,000 cases next year. Estimate after-tax profits at that level of sales.
e)Over the last several years, 4,000 cases of strawberries have been grown and sold. What does this information suggest about the quality of information you calculated for part (d)?
f)Describe reasons why the cost function you developed for sales of 4,000 cases might not hold for sales of 5,000 cases.