Click the icon to view the options table. What would the cost be for each option if the demand level is 20,000 units per year? If it is 100,000 units per year? Iculate the total costs for each option if the demand level is 20,000 units per year (enter your responses as whole numbers). Option 1 Option 2 Demand (units per year) 20,000 20,000 id the total costs for each option if the demand level is 100,000 units per year (enter your responses as whole numbers). Demand (units per year) 100,000 100,000 Option 1 Option 2 Total cost (per year) Total cost (per year)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Arktec Manufacturing must choose between the following two capacity options.
Click the icon view the options table.
a. What would the cost be for each option if the demand level is 20,000 units per year? If it is 100,000 units per year?
Calculate the total costs for each option if the demand level is 20,000 units per year (enter your responses as whole numbers).
Demand (units
per year)
20,000
20,000
Option 1
Option 2
Find the total costs for each option if the demand level is 100,000 units per year (enter your responses as whole numbers).
Demand (units
per year)
100,000
100,000
More Info
Option 1
Option 2
b. In general, which option do you think would be better as volume levels increase? As they decrease?
OA. As volume levels increase, Option 1 will be better, since the fixed cost lower. As volumes decrease, Option 1 will be better, as the variable cost is lower.
OB. As volume levels increase, Option 2 will be better, since the fixed cost is lower. As volumes decrease, Option 2 will be better, as the variable cost is lower.
OC. As volume levels increase, Option 2 will be better, since the variable cost is lower. As volumes decrease, Option 1 will be better, as the fixed cost is lower.
O D. As volume levels increase, Option 1 will be better, since the variable cost is lower. As volumes decrease, Option 2 will be better, as the fixed cost lower,
c. The indifference point is units. (Enter your response rounded to the nearest whole number.)
Option 1
Option 2
Fixed cost (per
year)
Print
Total cost (per year)
$900,000
$400,000
Total cost (per year)
Variable cost
(per unit)
Done
$3
$17
Transcribed Image Text:Arktec Manufacturing must choose between the following two capacity options. Click the icon view the options table. a. What would the cost be for each option if the demand level is 20,000 units per year? If it is 100,000 units per year? Calculate the total costs for each option if the demand level is 20,000 units per year (enter your responses as whole numbers). Demand (units per year) 20,000 20,000 Option 1 Option 2 Find the total costs for each option if the demand level is 100,000 units per year (enter your responses as whole numbers). Demand (units per year) 100,000 100,000 More Info Option 1 Option 2 b. In general, which option do you think would be better as volume levels increase? As they decrease? OA. As volume levels increase, Option 1 will be better, since the fixed cost lower. As volumes decrease, Option 1 will be better, as the variable cost is lower. OB. As volume levels increase, Option 2 will be better, since the fixed cost is lower. As volumes decrease, Option 2 will be better, as the variable cost is lower. OC. As volume levels increase, Option 2 will be better, since the variable cost is lower. As volumes decrease, Option 1 will be better, as the fixed cost is lower. O D. As volume levels increase, Option 1 will be better, since the variable cost is lower. As volumes decrease, Option 2 will be better, as the fixed cost lower, c. The indifference point is units. (Enter your response rounded to the nearest whole number.) Option 1 Option 2 Fixed cost (per year) Print Total cost (per year) $900,000 $400,000 Total cost (per year) Variable cost (per unit) Done $3 $17
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