A rotational molding operation has fixed costs of $6,000 per year and variable costs of $45...

A rotational molding operation has fixed costs of $6,000 per year and variable costs of $45 per unit. If the process is automated via conveyor, its fixed cost will be $43,000 per year, but its variable cost will be only $10 per unit. Determine the number of units each year necessary for the two operations to break even.

The number of units each year necessary for the two operations to break even is determined to be .

Expert Solution

The number of units each year necessary for the two operations to break-even is determined to be 1200 and 1075 units respectively.

Calculation:

Particulars	Option 1:		Option 2:
Particulars	Formula	Amount / Units	Formula	Amount / Units
Fixed Cost (a)	-	6,000.00	-	43,000.00
Assumed Sale Price (b)	-	50.00	-	50.00
Variable Cost (c)	-	45.00	-	10.00
Contribution per unit = d = b-c	(50 - 45)	5.00	(50 - 10)	40.00
Break-even units = Fixed Cost / Contribution per unit = e = a / d	(6000 / 5)	1,200.00	(43000 / 40)	1,075.00

ekkarill92 answered 1 year ago

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