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 $ 55,000 for proposal A and $ 70,000 for proposal B. In addition to the proposed fixed costs from the two​ vendors, Weiss's management anticipates that they will have to spend $ 10,000 for installations to be completed. The variable cost is $ 13.00 for A and $ 10.00 for B. The revenue generated by each unit is $ 20.00
The​ break-even point in dollars for the proposal by Vendor A​=

​(round your response to the nearest whole​ number).

​b) The​ break-even point in dollars for the proposal by Vendor B​ =

​(round your response to the nearest whole​ number).

Expert Answer

Answer 1

Answer:

Proposal A:  $185,714.29

Proposal B: $160,000

Explanation:

Giving the following information:

$10,000 for installations to be completed.

The revenue generated by each unit is $ 20.00

Proposal A:

Fixed costs= 55,000

The variable cost is $13.00

Proposal B:

Fixed costs= 70,000

The variable cost is $10.00

Break-even point (dollars)= fixed costs/ contribution margin ratio

Proposal A: (55,000+10,000)/[(20-13)/20]= $185,714.29

Proposal B: (70,000 + 10,000)/[(20-10)/20]= $160,000