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Lennox Candies manufactures jaw-breaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 3,900 per month. The machine costs $18,000 and is depreciated using straight line depreciation over 10 years assuming zero residual value. Rent for the factory space and warehouse and other fixed manufacturing overhead costs total $1,300 per month.

In January 2021, Lennox Candies makes and sells 1,500 jaw-breakers per month. The company buys just enough materials each month to make the jaw-breakers it needs to sell. Materials cost 10 cents per jawbreaker.

In 2022 (when the economy is back), Lennox Candies expects demand to increase by 100%. At this (100% increased) volume, it will get a 30% discount on price when purchasing the materials. Rent and other fixed manufacturing overhead costs will remain the same.

a. What is Lennox Candies' current annual relevant range of output?

b. What is Lennox Candies' current annual fixed manufacturing cost within the relevant range? What is the annual variable manufacturing cost?

c. What will Lennox Candies' relevant range of output be in 2022? How, if at all, will total annual fixed and variable manufacturing costs change in 2022? Assume that, if necessary, Lennox Candies could buy an identical machine at the same cost as the one it already has.

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