Question

Sroufe Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors have presented proposals. The fixed costs are $ 55 comma 000 for proposal A and $ 75 comma 000 for proposal B. The variable cost is $ 14.00 for A and $ 11.00 for B. The revenue generated by each unit is $ 22.00. ​a) The​ break-even point in units for the proposal by Vendor A​ = nothing units ​(round your response to the nearest whole​ number). ​b) The​ break-even point in units for the proposal by Vendor B​ = nothing units ​(round your response to the nearest whole​ number).

Answer 1

Answer:

A) Proposal A= 6875 units

B) Proposal B= 6818 units

Explanation:

Giving the following information:

Two vendors have presented proposals.

Proposal A:

Fixed costs= $55000.

Variable cost= $ 14.00.  

Proposal B:

Fixed cost= $75000.

Variable cost= $11.00

The revenue generated by each unit is $ 22.00

Break-even point= fixed costs/contribution margin

A) Proposal A= 55000/(22-14)= 6875 units

B) Proposal B= 75000/(22-11)= 6818 units