Weiss Manufacturing intends to increase capacity by overcoming a bottleneck oper

Question

Weiss Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors have presented proposals. The fixed costs are $ 60 comma 000 for proposal A and $ 80 comma 000 for proposal B. In addition to the proposed fixed costs from the two? vendors, Weiss's management anticipates that they will have to spend $ 12 comma 000 for installations to be completed. The variable cost is $ 14.00 for A and $ 12.00 for B. The revenue generated by each unit is $ 24.00.

a) The? break-even point in dollars for the proposal by Vendor A? =

?(round your response to the nearest whole? number).

?b) The? break-even point in dollars for the proposal by Vendor B? =

?(round your response to the nearest whole? number).

Explanation / Answer

a. The break even points indollars for the proposal by vendor A   = BEP (x) = F/ (P -V)

= $ 60,000 / ($ 24 - $ 14)

= $60,000 / $10

= $ 6000

2. The break even points in dollars for the proposal by vendor B =   BEP (X) = F/ (P-V)

                                                                                                     =   $80,000 / ( $24 -$ 12)

                                                                                                    = $80000 / $ 12

                                                                                                    = $ 6.666

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