Question

Weiss Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors have presented proposals. The fixed costs are $ 50 comma 000 for proposal A and $ 75 comma 000 for proposal B. In addition to the proposed fixed costs from the two​ vendors, Weiss's management anticipates that they will have to spend $ 8 comma 000 for installations to be completed. The variable cost is $ 12.00 for A and $ 10.00 for B. The revenue generated by each unit is $ 20.00. ​a) The​ break-even point in dollars for the proposal by Vendor A​

Answer 1

Answer:

The​ break-even point in dollars for the proposal by Vendor A​ is $125,000

Explanation:

The computation of the break even sales in dollars is shown below:

Break even point in dollars = (Fixed expenses) ÷ (Profit volume Ratio)  

where,

Profit volume ratio = (Contribution margin per unit) ÷ (selling price per unit) × 100

So, the Profit volume ratio = (8) ÷ (20) × 100 = 40%

And, Contribution margin per unit = Selling price per unit - Variable expense per unit  

= $20 - $12

= $8

And, the fixed expenses is $50,000

Now put these values to the above formula  

So, the value would equal to  

= (50,000) ÷ (40%)  

= $125,000