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Problem 1: A Fabrication Co. wants to increase capacity by adding a new machine. The fixed...
Problem 1: A Fabrication Co. wants to increase capacity by adding a new machine. The fixed costs for machine A are $90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. What is the break-even point for machine A? Show work
A) $90,000 dollars
B) 90,000 units
C) $15,000 dollars
D) 15,000 units
E) 4,286 units
Solutions
Expert Solution
Breakeven point can be calculated using the following formula:
$$ \begin{aligned} \text { Break even point(units) } &=\frac{\text { Total fixed cost }}{\text { price - variable cost }} \\ &=\frac{90,000}{21-15} \\ &=15,000 \text { units } \end{aligned} $$
Hence, option \(\mathrm{D}\) is correct.
Amanda K answered 2 years agoRelated Solutions
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