Question: a small firm intends to increase the capacity of a...
Question details
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 $36,000 for A and $31,000
for B; variable costs per unit would be $7 for A and $11 for B; and
revenue per unit would be $17.
a. Determine each alternative’s break-even point
in units. (Round your answer to the nearest whole
amount.)
Q_{BEP,A} | units ____ |
Q_{BEP,B} | units ____ |
b. At what volume of output would the two
alternatives yield the same profit? (Round your answer to
the nearest whole amount.)
Profit ________ units
c. If expected annual demand is 14,000 units,
which alternative would yield the higher profit?
Higher profit
(Click to
select) A B