Question: a small firm intends to increase the capacity of a...
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.)
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