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kompoz [17]
3 years ago
11

A company is considering two designs for a machine in its manufacturing line. The first, called machine A, will cost $160000 in

fixed costs and will cost $80 per unit in variable costs, for each unit it produces. The second, called B, will cost $270000 in fixed costs and will cost $2 per unit in variable costs, for each unit it produces. At what volume of production will the two machines cost the same
Business
1 answer:
ExtremeBDS [4]3 years ago
6 0

Answer:

The indifference point is 1,410 units

Explanation:

Giving the following information:

Machine A:

Fixed costs= $160,000

Unitary variable cost= $80

Machine B:

Fixed costs= $270,000

Unitary variable cost= $2

<u>First, we need to structure the total cost formula for each machine:</u>

Machine A= 160,000 + 80x

Machine B= 270,000 + 2x

x= number of units

<u>Now, we equal both formulas and isolate x:</u>

160,000 + 80x = 270,000 + 2x

78x = 110,000

x= 110,000/78

x= 1,410 units

The indifference point is 1,410 units

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