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 $ 20.00a) 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).

Answer 1

Answer:

The​ break-even point in dollars for the proposal by Vendor A​ $ 157,142.86

The​ break-even point in dollars for the proposal by Vendor B​ =​$ 140,000

Explanation:

Weiss Manufacturing

                                                 Proposal A          Proposal B

The fixed costs                          $ 55,000               $ 70,000

The variable cost                        $ 13.00                   $ 10.00

The revenue generated

By each unit is                           $ 20.00                     $ 20.00

The​ break-even point  for the proposal by Vendor A​= Fixed Costs/Sales Revenue- Variable Costs

Break Even Sales Volume in Dollars= Fixed Costs/ Contribution Margin Ratio

Break Even Sales Volume in Dollars= Fixed Costs/ 1- (variable Costs/ Sales)

The​ break-even point in dollars for the proposal by Vendor A​

                                   = 55,000/1- (13/20)= $ 55000/ 0.35= $ 157,142.86

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

                                     = 70,000/ 1- ( 10/20) = 70,000/0.5= $ 140,000

Answer 2

Answer:

BREAK EVEN POINT IN DOLLARS FOR PROPOSAL A = $184,714

BREAK EVEN POINT IN DOLLARS FOR PROPOSAL B = $160,000

Explanation:

Given the following ;

Fixed cost ;

Proposal A = $55,000

Proposal B = $70,000

Variable Cost per unit;

Proposal A = $13

Proposal B = $10

Total Revenue per unit;

Proposal A =$20

Proposal B =$20

Installation cost = $10,000

Calculating theBreak even point in dollars for proposal A and B.

Break even point in dollars is given by;

(Fixed cost ÷ contribution margin)

Contribution margin = (Revenue per unit - variable cost per unit) ÷ revenue per unit

BREAK EVEN POINT IN DOLLARS (PROPOSAL A)

contribution margin = $(20 - 13)÷$20 = 0.35

Total Fixed cost = $55,000+$10,000(installation cost) = $65,000

Fixed cost / contribution margin = $65,000 ÷ 0.35 = $185,714

BREAK EVEN POINT IN DOLLARS (PROPOSAL B)

contribution margin = $(20 - 10)÷$20 = 0.5

Total Fixed cost = $70,000+$10,000(installation cost) = $80,000

Fixed cost / contribution margin = $80,000 ÷ 0.5 = $160,000