Question

A small producer of machine tools wants to move to a larger building, and has identified two alternatives. Location A has annual fixed costs of $150,000 and variable costs of $20,000 per unit; location B has annual fixed costs of $350,000 and variable costs of $18,000 per unit. The finished items sell for $22,000 each. a. At what volume of output would the two locations have the same total cost

Answer 1

Answer: 100 units

Step-by-step explanation:

Assume the volume of output where the two locations have the same total cost is x.

Volume is;

150,000 + 20,000x = 350,000 + 18,000x

20,000x - 18,000x = 350,000 - 150,000

2,000x = 200,000

x = 200,000 / 2,000

x = 100 units