Stapleton Manufacturing intends to increase capacity through the addition of new

Question

Stapleton Manufacturing intends to increase capacity through the addition of new equipment. Two vendors have presented proposals. The fixed cost for proposal A is $61,000, and for proposal B, $33,000. The variable cost for A is $9, and for B, $14. The revenue generated by each unit is $16. a) What is the crossover point for the two options? The crossover point for the two options is 5600 units. (Round your response to the nearest whole number.) b) At an expected volume of 3,600 units, which alternative should be chosen? The profit (loss) if proposal A is accepted and 3,600 units are produced is $ - 35,800. (Round your response to the nearest dollar and include a minus sign if necessary.) The profit (loss) if proposal B is accepted and 3,600 units are produced is $. (Round your response to the nearest dollar and include a minus sign if necessary.)

Explanation / Answer

a) Cross over point = (61000-33000)/(14-9) = 5600 units

b) At 3600 units, Profit/loss in proposal A = 16*3600-61000-9*3600 = -35800 (loss)

c) At 3600 units, Profit/loss in proposal B = 16*3600-33000-14*3600 = -25800 (loss)

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