Question

A firm is considering two location alternatives: A and B. Alternative A would have an annual fixed cost of $300,000 and variable costs of $25 per unit. Alternative B would have annual fixed costs of $250,000 and variable costs of $30 per unit. Revenue is expected to be $60 per unit for both locations. Develop an indifference

Answer 1

Answer:

Check the explanation

Explanation:

Alternative A

Let the break even point be X, then

Total Revenue = Total Expense

60*X = (300000 + 25*X)

35*X = 300000

X = 8571.43 Units

Alternative B

Let the break even point be Y, then

60*Y = (250000 + 30*Y)

30*Y = 250000

Y = 8333.33 Units