Warren's Ice Cream makes 4 different flavors of ice cream using their secret process and top secret recipes. Each of their flavors is equally popular and experiences a demand of 5,000 gallons/year
Warren's process is capable of producing 100 gallons/day once they incur the $25 setup cost. The ice cream holding cost is 10% of the $5 per gallon price. Warren's plant runs 250 days a year and stays busy doing so, but management feels they can add another flavor to their product line and increase their revenue. Which of the following statements is appropriate for this scenario?
A) Warren's can comfortably add a fifth flavor without increasing the number of days they operate.
B) Warren's cannot add the fifth flavor because the holding cost would increase.
C) Warren's can add the fifth flavor only if there is zero setup time between flavors.
D) Warren's cannot add the fifth flavor because demand would exceed capacity.
C
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