A small firm intends
to increase the capacity of a bottleneck operation by adding a new
machine....
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Accounting
A small firm intendsto increase the capacity of a bottleneck operation by adding a newmachine. Two alternatives, A and B, have been identified, and theassociated costs and revenues have been estimated. Annual fixedcosts would be $36,000 for A and $31,000 for B; variable costs perunit would be $8 for A and $11 for B; and revenue per unit would be$16.
a.
Determine eachalternative’s break-even point in units. (Round your answerto the nearest whole amount.)
QBEP,A
units
QBEP,B
units
b.
At what volumeof output would the two alternatives yield the same profit?(Round your answer to thenearest wholeamount.)
Profit
units
c.
If expectedannual demand is 11,000 units, which alternative would yield thehigher profit?
Higher profit
(Click toselect)BA
Answer & Explanation
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4.3 Ratings (784 Votes)
a The break even quantity for Machine A Qbep FC Contribution Per unit 36000168 4500 units The break even quantity for Machine B Qbep FC Contribution Per unit 310001611 6200
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