Question

Arike Ogwumike Manufacturing intend to increase capacity through the addition of new equipment. Two vendors have presented proposals. The fixed cost for proposal A is $ 68,000, and for proposal B is $ 25,000 . The variable cost for A is $ 11 and for B, $ 16. The revenue generated by each unit is $ 20 .

What is the crossover point for the two options?
The crossover point for the two options is ____ units.

Answer 1

The crossover point between Proposal A and Proposal B is at 8,600 units.

Step-by-step explanation:

In order to find the crossover point between Proposal A and Proposal B, we need to set their total costs equal to each other and solve for the number of units. Let x represent the number of units. The total cost for Proposal A is given by: $68,000 + $11x. The total cost for Proposal B is given by: $25,000 + $16x. Setting these two equal to each other, we get:

$68,000 + $11x = $25,000 + $16x

Subtracting $11x and $25,000 from both sides, we have: $43,000 = $5x

Dividing both sides by $5, we get: x = 8,600

The crossover point between the two options is at 8,600 units.