A small firm intends to increase the capacityof a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and associated cost and revenues have been estimated. Annual fixed costs would be $54,000 for A and $27,000 for B variable costs per unit would be $9 for A and $11 for B, and revenue per unit would be $16. a. Determine each alternative's break-even point in units. b. At what volume of output would the two alternatives yeild the same profit (or loss)? c. If expected annual demand is $13,000 units, which alternative would yield the higher profit (or the lower loss)?
A small firm intends to increase the capacityof a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and associated cost and revenues have been estimated. Annual fixed costs would be $54,000 for A and $27,000 for B variable costs per unit would be $9 for A and $11 for B, and revenue per unit would be $16. a. Determine each alternative's break-even point in units. b. At what volume of output would the two alternatives yeild the same profit (or loss)? c. If expected annual demand is $13,000 units, which alternative would yield the higher profit (or the lower loss)?
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 capacityof a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and associated cost and revenues have been estimated. Annual fixed costs would be $54,000 for A and $27,000 for B variable costs per unit would be $9 for A and $11 for B, and revenue per unit would be $16.
a. Determine each alternative's break-even point in units.
b. At what volume of output would the two alternatives yeild the same profit (or loss)?
c. If expected annual demand is $13,000 units, which alternative would yield the higher profit (or the lower loss)?
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