Answer:
a. Alternative A Break-even point is 8,000 units Alternative B Break-even point is 7,500 units
b. Same profit with both alternatives at 10,000 units
c. Alternative A would have higher profit with a demmand of 12,000 units
Explanation:
a. FC/CMGu=BP
being:
FC= fixed costs
CMGu=contribution margin per unit
BP= Break even point
CMGu is the difference between price of sale and variable cost (per unit)
Alt. A Break-even point is $40,000/$5=8,000 UNITS
Alt. B Break-even point is $30,000/$4=7,500 UNITS
b. At 10,000 units both alternatives have the same profit
Alt. a.
Revenues= $150,000
Variable cost= $-100,000
Fixes Costs= $-40,000
------------------------------------
profit $10,000
Alt. b.
Revenues= $150,000
Variable cost= $-110,000
Fixes Costs= $-30,000
------------------------------------
profit $10,000
c. sales for 12,000 units
Alt. a.
Revenues= $180,000
Variable cost= $-120,000
Fixes Costs= $-40,000
------------------------------------
profit $20,000
Alt. b.
Revenues= $180,000
Variable cost= $-132,000
Fixes Costs= $-30,000
------------------------------------
profit $18,000
