Problem
A manager has to decide how many machines to purchase for a new production facility. Once the machines are purchased, production will start. Estimated monthly fixed cost and production capacity are provided below for each alternative. The unit variable cost and the unit revenue of the product are estimated to be $20 and $50, respectively.
|
Number of Machines to Purchase
|
Monthly Fixed Cost
|
Monthly Total Production Capacity (in units)
|
|
1
|
$18,000
|
0-500
|
|
2
|
$24,000
|
0-1,000
|
|
3
|
$30,000
|
0-1,500
|
(a) If only one machine is purchased, what is the monthly production level to break even?
(b) If two machines are purchased, what is the monthly production level to break even?
(c) If three machines are purchased, what is the monthly production level to break even?