. A poultry farmer is debating whether to acquire Rhode Island Reds or Buff Orpi

Question

. A poultry farmer is debating whether to acquire Rhode Island Reds or Buff Orpingtons to lay the eggs he wants to sell. The fixed costs for the Buffs would be $7500 and the variable costs per egg would be a dime per egg. The Reds would have a fixed cost of $6000 and a variable cost of fifteen cents. At what level of egg production would the poultry farmer be indifferent between Rhode Island Reds and Buff Orpingtons? (Please perform a Break-Even Analysis)

Please, type the answer and with formula

Explanation / Answer

To be indifferent to between Rhode Island Reds and Buff Orpingtons the total cost should be equal for both.

Let the egg production be x

cost for Rhode Island Reds = fixed cost + variable cost

= 6000 + 0.15*x

cost for Buff Orpingtons = fixed cost + variable cost

= 7500 + 0.1*x

for indifference both cost must be equal:

6000 + .15x = 7500 + 0.1x

0.15x - 0.1x = 7500 - 6000

0.05x = 1500

x = 30000

Hence, at the production level of 30000, the poultry farmer would be indifferent between Rhode Island Reds and Buff Orpingtons.

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