A small firm intends to increase the capacity of a bottleneck operation by addin
ID: 450141 • Letter: A
Question
A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $37,000 for A and $35,000 for B; variable costs per unit would be $8 for A and $11 for B; and revenue per unit would be $16.
A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $37,000 for A and $35,000 for B; variable costs per unit would be $8 for A and $11 for B; and revenue per unit would be $16.
Explanation / Answer
a.Determine each alternative’s break-even point in units.
QBEP,B 7,000 units
b.At what volume of output would the two alternatives yield the same profit?
ANSWER:Profit 5,000 units.
QBEP,A 4,625 unitsQBEP,B 7,000 units
b.At what volume of output would the two alternatives yield the same profit?
ANSWER:Profit 5,000 units.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.