A small firm intends to increase the capacity of a bottleneck operation

A small firm intends to increase the capacity of a bottleneck operation
by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $38,000 for A and $31,000 for B; variable costs per unit would be $7 for A and $11 for B; and revenue per unit would be $19.

a.Determine each alternative’s break-even point in units. (Round your answer to the nearest whole amount.)

QBEP,A _____ units
QBEP,B _____ units

b.At what volume of output would the two alternatives yield the same profit? (Round your answer to thenearest whole amount.)

Profit ______units

c.If expected annual demand is 10,000 units, which alternative would yield the higher profit?

Higher profit(Click to select)
B or A

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