Question

Nagle​ Electric, Inc., of​ Lincoln, Nebraska, must replace a robotic Mig welder and is evaluating two alternatives. Machine A has a fixed cost for the first year of ​$70 comma 000 and a variable cost of ​$18​, with a capacity of 21 comma 000 units per year. Machine B is​ slower, with a speed of​ one-half of​ A's, but the fixed cost is only ​$54 comma 000. The variable cost will be​ higher, at ​$22 per unit. Each unit is expected to sell for ​$32. ​a) What is the crossover point​ (point of​ indifference) for the two​ machines? The crossover point for the two machines is nothing units.

Answer 1

Crossover point for the two machines is 4000 units

Step-by-step explanation:

given data

fixed cost A = $70,000

variable cost A = ​$18

capacity of 21,000 units

fixed cost B = ​$54,000

variable cost B = ​$22

sell = ​$32

to find out

crossover point​ for the two​ machines

solution

Total cost A = Fixed cost + Variable cost × no of units

Total cost A = $70,000 + 18 Q

and

Total cost B = Fixed cost + Variable cost × no of units

Total cost B = $54,000 + 22 Q

so

Cross over point is the point where total cost is equal

so here we know cross over point = Q

$70,000 + 18 Q = $54,000 + 22 Q

Q =4000 units

Crossover point for the two machines is 4000 units