Juan is wondering if he can earn higher profits in his liquor bottle manufacturing business. He purchases glass ingredients at a rate of $20 per 100 lbs. Each manufactured tequila bottle weighs 1 lb....

Juan is wondering if he can earn higher profits in his liquor bottle manufacturing business. He purchases glass ingredients at a rate of $20 per 100 lbs. Each manufactured tequila bottle weighs 1 lb. Labour and related costs amount to $1.50 per bottle. Juan sells his ½ litre bottles to tequila producers for $3.00 each.

Juan believes he can produce his own quality tequila which would sell for $17 per bottle. Even though high demand is keeping his factory busy all the time, there is a possibility that filling the bottles himself would make Juan wealthier. He believes that ingredients for one litre of tequila would cost $10. Added labour would amount to $4 per bottle. Variable overhead would add $2 per bottle.

Should Juan fill his own bottles? Discuss all important factors and make recommendations.