Suppose you determine that the breakeven point for a particular new line (for ca

Question

Suppose you determine that the breakeven point for a particular new line (for capacity up to 2000 items per month) is 1000 items per month at a cost of $20. You estimate that the demand is 1500 items per month. The variable cost is $10 per month. Should you add the line? How much capacity should you use?

Do not add the line

Add the line and produce approximately 1000 items per month

Add the line and produce approximately 1500 items per month

Add the line and produce approximately 2000 items per month

Do not add the line

Add the line and produce approximately 1000 items per month

Add the line and produce approximately 1500 items per month

Add the line and produce approximately 2000 items per month

Explanation / Answer

c)Add the line and produce approximately 1500 items per month

Explanation:

the Line having capcity of 2,000 and Variable Cost is $10,

Demand of the product is 1,500, the new line have to produce the demand of the product, then only product make profit.

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