Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Two alternative locations have been identified: Bonham and McKinney. Bonham would have fixed costs of $ 800,000 per year and variable costs of $ 13,000 per standard unit produced. McKinney would have annual fixed costs of $ 920,000 and variable costs of $ 12,000 per standard unit. The finished items sell for $ 29,000 each.
Costs:
Bonham= 800,000 + 13,000*x
McKinney= 920,000 + 12,000*x
1) 800,000 + 13,000*x=920,000 + 12,000*x
1,000x=120,00
x=120 units
2) Because Bonham has a higher variable cost, from the indifference point and below, it generates a higher profit. From 120 units and more it generates less profit than McKinney.
3) Break-even point= fixed costs/ contribution margin
Bonham:
Break-even point= 800,000/(29,000 - 12,000)= 47 units
McKinney:
Break-even point= 920,000/(29,000-13,000)= 58 units
