Question

Markland 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 $ 70 comma 000 for proposal B. The variable cost is $ 12.00 for A and $ 10.00 for B. The revenue generated by each unit is $ 20.00. Vendor A and Vendor B have the same cost when the output volume​ = nothing units ​(round your response to the nearest whole​ number).

Answer 1

Answer:

10,000 units

Explanation:

Given:

Total fixed costs for proposal A = $50,000

Total fixed costs for proposal B = $70,000

Variable cost for proposal A = $12

Variable cost for proposal B = $10

Revenue generated by each vendor = $20

let the number of units be 'x'

Now,

Cost of proposal A = Cost of proposal B

Fixed cost + x × Variable cost of proposal A = Fixed cost + x × Variable cost of proposal B

or

$50,000 + x × $12 = $70,000 + x × $10

or

x × $12 - x × $10 = $70,000 - $50,000

or

x × $2 = $20,000

or

x = 10,000 units

Answer 2

Question is Incomplete

a) What is the break-even point in units for proposal A?

b) What is the break-even point in units for proposal B?

Answer:

a. Break Even Point for Proposal A = 6,250 Units

a. Break Even Point for Proposal B = 7,000 Units

Explanation:

a. Calculating Break Even Point for Proposal A

Given

For Proposal A:

Fixed costs = $50,000

Variable cost = $ 12.00

Revenue generated = $20.00.

The break unit point is calculated using the following formula:

Break Even Point = F/ (R - V) =

Where F = Fixed Cost = $50,000

R = Generated Revenue = $20

V = Variable Cost = $12

By Substituton

Break Even Point = $50000/($20-$12)

Break Even Point = $50000/$8

Break Even Point = 6250 Units

a. Calculating Break Even Point for Proposal A

Given

For Proposal A:

Fixed costs = $50,000

Variable cost = $ 12.00

Revenue generated = $20.00.

The break unit point is calculated using the following formula:

Break Even Point = F/ (R - V) =

Where F = Fixed Cost = $50,000

R = Generated Revenue = $20

V = Variable Cost = $12

By Substituton

Break Even Point = $50,000/($20-$12)

Break Even Point = $50,000/$8

Break Even Point = 6250 Units

b. Calculating Break Even Point for Proposal B

Given

For Proposal B

Fixed costs = $70,000

Variable cost = $ 10.00

Revenue generated = $20.00.

The break unit point is calculated using the following formula:

Break Even Point = F/ (R - V) =

Where F = Fixed Cost = $70,000

R = Generated Revenue = $10

V = Variable Cost = $12

By Substituton

Break Even Point = $70,000/($20-$10)

Break Even Point = $70,000/$10

Break Even Point = 7,000 Units