8. Assume that you and your brother plan to open a business that will make and s

Question

8. Assume that you and your brother plan to open a business that will make and sell a newly designed type of sandal. Two robotic machines are available to make the sandals, Machine A and Machine B. The price per pair will be $19.50 regardless of which machine is used. The fixed and variable costs associated with the two machines are shown below. What is the difference between the breakeven points for Machines A and B? (Hint: Find BEB - BEA)


Machine A
Machine B
Price per pair (P)
$19.50
$19.50
Fixed costs (F)
$25,000
$100,000
Variable cost/unit (V)
$7.00
$4.00
Answer
a. 3,784
b. 4,318
c. 3,739
d. 4,674
e. 4,452

Explanation / Answer

breakeven points for Machines A = $25,000/($19.50-$7.00)=2000 breakeven points for Machines B = $100,000/($19.50-$4.00)=6452 Difference = 6452-2000 = 4,452 e. 4,452

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