Question

A manager must decide how many machines of a certain type to purchase.

Each machine can process 101 customers per day.

One machine will result in a fixed cost of $2,038 per day, while two machines will result in a fixed cost of $3,836 per day.

Variable cost will be $22 per customer and revenue will be $49 per customer.

Determine the break-even point in units for TWO machines.

*Round your answers to 3 decimal places in your calculation if necessary.

Answer 1

A manager must decide how many machines of a certain type to purchase.

Each machine can process 101 customers per day.

One machine will result in a fixed cost of $2,038 per day, while two machines will result in a fixed cost of $3,836 per day. Variable cost will be $22 per customer and revenue will be $49 per customer.

Determine the break-even point in units for TWO machines.

*Round your answers to 3 decimal places in your calculation if necessary.

Here the assumption is that 2 machines are purchased. Hence fixed cost will be $3836 per day

Variable cost is $22 per customer and revenue is $49 per customer

Hence, contribution margin defined as revenue - variable cost = 49 - 22 = $27 per customer

Now at the breakeven point, the total contribution margin from customers served will be same as fixed cost

Let the breakeven point be reached at x customers

So total contribution margin 27x = 3836

i.e x = 142.074