A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $36,000 for A and $31,000 for B; variable costs per unit would be $7 for A and $11 for B; and revenue per unit would be $17. a. Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount.) ОВЕРА units ОВЕРВ units b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount.) units c. If expected annual demand is 14,000 units, which alternative would yield the higher profit (or the lower loss)? Higher profit

A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $36,000 for A and $31,000 for B; variable costs per unit would be $7 for A and $11 for B; and revenue per unit would be $17. a. Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount.) ОВЕРА units ОВЕРВ units b. At what volume of output would the two alternatives yield the same profit (or loss)? (Round your answer to the nearest whole amount.) units c. If expected annual demand is 14,000 units, which alternative would yield the higher profit (or the lower loss)? Higher profit

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 5E

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Economics Question
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