solution

Using the data in Problem S7.17:

a) What is the break-even point in dollars for proposal A if you add $10,000 installation to the fixed cost?

b) What is the break-even point in dollars for proposal B if you add $10,000 installation to the fixed cost?

Problem S7.17

Markland Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors have presented proposals. The fixed costs for proposal A are $50,000, and for proposal B, $70,000. The variable cost for A is $12.00, and for B, $10.00. The revenue generated by each unit is $20.00.

a) What is the break-even point in units for proposal A?

b) What is the break-even point in units for proposal B?