Weiss Manufacturing intends to increase capacity by overcoming a bottleneck oper

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 $60,000 for proposal A and $80,000 for proposal B. In addition to the proposed fixed costs from the two vendors, Weiss's management anticipates that they will have to spend $8,000 for installations to be completed. The variable cost is$12.00for A and $12.00for B. The revenue generated by each unit is $20.00.
a) 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).

Explanation / Answer

Total costs = Total Revenue (for breakeven)

FC+VC = R => FC+v*n = s*n => n(BEP in units) = FC/(s-v) where s = selling price per unit and v = variable cost per unit, n = number of units

a) Vendor A --->

n = 60000/(20-12) = 7500 units

Dollar value of BEP = 7500*20 = 150000 $

b) Vendor B --->

n = 80000/(20-12) = 10000 units

Dollar value of BEP = 10000*20 = 200000 $

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.