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Problem 2 A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have
Problem 2 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. Fixed costs would be $40,000 for A and $24,000 for B; variable costs per unit would be $10 for A and $12 for B; and revenue per unit would be $20. a. Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount, 5 points) b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount, 5 points) c. What volumes are needed to obtain a profit of $12,000 for each alternative? (5 points) d. Assume the annual sell is 1000 units, what are their corresponding payback periods to recoup its initial cost (Fixed Cost)? (5 points)
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