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A small firm intends to increase the capacity of a bottleneck operation by adding a new machine....

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Accounting

A small firm intendsto increase the capacity of a bottleneck operation by adding a newmachine. Two alternatives, A and B, have been identified, and theassociated costs and revenues have been estimated. Annual fixedcosts would be $36,000 for A and $31,000 for B; variable costs perunit would be $8 for A and $11 for B; and revenue per unit would be$16.

    

a.Determine eachalternative’s break-even point in units. (Round your answerto the nearest whole amount.)

    

  QBEP,Aunits
  QBEP,Bunits

   

b.At what volumeof output would the two alternatives yield the same profit?(Round your answer to the nearest wholeamount.)

    

  Profitunits

   

c.If expectedannual demand is 11,000 units, which alternative would yield thehigher profit?

    

  Higher profit(Click toselect)BA

Answer & Explanation Solved by verified expert
4.3 Ratings (784 Votes)
a The break even quantity for Machine A Qbep FC Contribution Per unit 36000168 4500 units The break even quantity for Machine B Qbep FC Contribution Per unit 310001611 6200    See Answer
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