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 $ 50,000 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 $ 10 comma 000$10,000 for installations to be completed. The variable cost is $13.00 for A and $12.00 for 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).

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Proposal A:

The fixed costs are $ 50,000.

Unitary variable cost= 13

Proposal B:

The fixed costs are= $80,000

Unitary variable cost= $10

Fixed costs for the company= $10,000

Selling price per unit= $20

To calculate the break-even point in units for each proposal, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Proposal A:

Break-even point in units= (50,000 + 10,000) / (20 - 13)

Break-even point in units= 8,571 units

Proposal B:

Break-even point in units= (80,000 + 10,000) / (20 - 10)

Break-even point in units= 9,000 units