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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 $23,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $16. a. Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount.) ОВЕРА ОВЕРВ units units b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount.) units c. If expected annual demand is 11,000 units, which alternative would yield the higher profit (or the lower loss)?

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 $23,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $16. a. Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount.) ОВЕРА ОВЕРВ units units b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount.) units c. If expected annual demand is 11,000 units, which alternative would yield the higher profit (or the lower loss)?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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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 $23,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $16. a. Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount.) QBEPA QBEP,B b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount.) Q units units units Check my work c. If expected annual demand is 11,000 units, which alternative would yield the higher profit (or the lower loss)?
Transcribed Image Text: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 $23,000 for B; variable costs per unit would be $10 for A and $11 for B; and revenue per unit would be $16. a. Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount.) QBEPA QBEP,B b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount.) Q units units units Check my work c. If expected annual demand is 11,000 units, which alternative would yield the higher profit (or the lower loss)?
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