document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1063304>Question 1063304</A>: <I><SPAN STYLE=\"word-break: break-all;\"> A small firm intends to increase the capacity of a bottleneck operation by adding a new machine.<BR>\n" );
document.write( "Two alternatives, A and B, have been identified, and the associated costs and revenues have been<BR>\n" );
document.write( "estimated. Annual fixed costs would be $40,000 for A and $30,000 for B; variable costs per unit<BR>\n" );
document.write( "would be $10 for A and $11 for B; and revenue per unit would be $15.<BR>\n" );
document.write( "a. Determine each alternative’s break-even point in units.<BR>\n" );
document.write( "b. At what volume of output would the two alternatives yield the same profit?<BR>\n" );
document.write( "c. If expected annual demand is 12,000 units, which alternative would yield the higher profit? </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #678396 by </B><A HREF=/tutors/aboutme.mpl?userid=Boreal><B>Boreal(15235)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Boreal><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Boreal><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=678396\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> break-even for a is 40,000+10x=15x<BR>\n" );
document.write( "5x=40,000; x=8000 units.<BR>\n" );
document.write( "break-even for b is 30,000+11x=15x<BR>\n" );
document.write( "4x=30,000; x=7500 units.<BR>\n" );
document.write( "----------------------<BR>\n" );
document.write( "same profit when 40,000+10x=30,000+11x<BR>\n" );
document.write( "x=10,000 units<BR>\n" );
document.write( "A will make 150,000-40,000-100,000=10,000<BR>\n" );
document.write( "B will make 150,000-30,000-110,000=10,000<BR>\n" );
document.write( "---------------------<BR>\n" );
document.write( "at 12,000<BR>\n" );
document.write( "a will make 180,000-40,000-120,000=20,000<BR>\n" );
document.write( "b will make 180,000-30,000-132,000=18,000<BR>\n" );
document.write( "a will yield more profit, which makes sense, because variable costs are now less and fixed costs have been recovered. </SPAN>\n" );
document.write( "</TD></TR></TABLE>\n" );