Question
A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified,
A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $37,000 for A and $31,000 for B; variable costs per unit would be $9 for A and $11 for B; and revenue per unit would be $19. a. Determine each alternatives break-even point in units. (Round your answer to the nearest whole amount.)
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b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount.)
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c. If expected annual demand is 15,000 units, which alternative would yield the higher profit (or the lower loss)?
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