Question

Stapleton Manufacturing intends to increase capacity through the addition of new equipment. Two vendors have presented proposals. The fixed cost for proposal A is $64,000 and for proposal B, $29,000. The variable cost for A is $15, and for B, $19. The revenue generated by each unit is $24. What is the crossover point for the two options?A. $8,750 B. 8,750 units C. 3,875 units D. $4,895

Answer 1

Answer:

The indifference point is 8,750 units.

Explanation:

Giving the following information:

The fixed cost for proposal A is $64,000 and for proposal B, $29,000. The variable cost for A is $15, and for B, $19.

To determine the indifference point, first, we need to formulate the costs equation.

Proposal A:

Total cost= 64,000 + 15*x

Proposal B:

Total cost= 29,000 + 19*x

Now, we need to equal both formulas:

64,000 + 15x = 29,000 + 19x

35,000= 4x

8,750= x= indifference point

The indifference point is 8,750 units