Markland Manufacturing manufactures desk lamps intends to increase capacity by obtaining new equipment. Two vendors have presented proposals. The purchase cost for proposal A is $30,000, and for proposal B, $80,000. Each proposal will produce lamps of the same quality. Proposal A is expected to produce lamps at $15.00/lamp, while proposal B is significantly more efficient and will produce them at $10.00/lamp. The revenue generated by the sale of each lamp is $20.00/unit. a. Plot, on the same graph, the lines describing the potential revenue from each proposal. b. What is the break-even point in lamps for proposal A? c. What is the break-even point in lamps for proposal B?
3.
Markland Manufacturing manufactures desk lamps intends to increase capacity by obtaining new
equipment. Two vendors have presented proposals. The purchase cost for proposal A is $30,000,
and for proposal B, $80,000. Each proposal will produce lamps of the same quality. Proposal A
is expected to produce lamps at $15.00/lamp, while proposal B is significantly more efficient and
will produce them at $10.00/lamp. The revenue generated by the sale of each lamp is $20.00/unit.
a. Plot, on the same graph, the lines describing the potential revenue from each proposal.
b. What is the break-even point in lamps for proposal A?
c. What is the break-even point in lamps for proposal B?
d. What is the point of indifference?
e. The manufacturer expects to sell 12,000 lamps and has informed the vendors that it has chosen proposal B. The vendor of proposal A has offered to re-negotiate the purchase price of its proposal in order to win
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