Excel sheet showing calculations as well 2-30 Bismarck Manufacturing intends to increase capac-ity through the addition of new equipment. Twovendors have presented proposals. The fixed cost forproposal A is $65,000, and for proposal B, $34,000.The variable cost for A is $10, and for B, $14. Therevenue generated by each unit is $18.(a) What is the break-even point for each proposal?(b) If the expected volume is 8,300 units, whichalternative should be chosen?

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Excel sheet showing calculations as well

2-30 Bismarck Manufacturing intends to increase capac-
ity through the addition of new equipment. Two
vendors have presented proposals. The fixed cost for
proposal A is $65,000, and for proposal B, $34,000.
The variable cost for A is $10, and for B, $14. The
revenue generated by each unit is $18.
(a) What is the break-even point for each proposal?
(b) If the expected volume is 8,300 units, which
alternative should be chosen?

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Step 1

The Break Even Point is the production level where total revenues equal total expenses. At that point, there is no profit in the company. In other words, the break-even point is a point when the company produces the same amount of revenues as expenses during a manufacturing process or in an accounting year.

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