Process X is estimated to have a fixed cost of $35,000 per year and a variable cost of $60 per unit in year 1, decreasing by $5 per unit per year thereafter. Process Y will have a fixed cost of $71,000 per year and a variable cost of $10 per unit in year 1, increasing by $1 per unit per year thereafter. At an interest rate of 12% per year, how many units must be produced in year 5 for the two processes to break even?
Process X is estimated to have a fixed cost of $35,000 per year and a variable cost of $60 per unit in year 1, decreasing by $5 per unit per year thereafter. Process Y will have a fixed cost of $71,000 per year and a variable cost of $10 per unit in year 1, increasing by $1 per unit per year thereafter. At an interest rate of 12% per year, how many units must be produced in year 5 for the two processes to break even?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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