Question

Peggy Lane Corp. a producer of machine tools, wants to move to a larger site. Two alternative locations have been identified: Bonham and Mckinney. Bonham would have fixed costs of _$820,000_____ per year and variable costs of __$15,000_____ per standard unit produced. McKinney would have annual fixed costs of 920,000______ and variable costs of __13,9000____ per standard unit. The finished items sell for _28,000_____ eacha) The volume of output at which both the locations have the same profit= ____ Standard units (round to nearest whole number)d) the breakeven point for bonham is ___ unitsThe breakeven point for Mckinney is _____ units

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Two alternative locations have been identified:

Bonham:

fixed costs of  $820,000

variable costs of $15,000

Mckinney:

fixed costs of $920,000

variable costs of $13,900

1) Bonham= 820,000 + 15,000*x

Mckinney= 920,000 + 13,900*x

820,000 + 15,000x= 920,000 + 13,900x

1,100x= 100,000

x= 91 units

2) Break-even point= fixed costs/ contribution margin

Bonham:

Break-even point= 820,000/(28,000 - 15,000)= 63 units

Mckinney:

Break-even point= 920,000/(28,000 - 13,900)= 65 units