Business Strategy and Business Analysis
Fred's Fabrication: Where is the crossover between Machine A
Question: Fred's Fabrication, Inc. wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $70,000. The variable cost for A is $9.00 per unit and for B, $14.00. The revenue generated by the units processed on these machines is $20 per unit. The crossover between machine A and machine B is:
a) 4,000 units, with A more profitable at low volumes
b) 4,000 dollars, with A more profitable at low volumes
c) 4,000 units, with B more profitable at low volumes
d) 4,000 dollars, with B more profitable at low volumes
e) none of these
Please choose the right answer and provide description on how you have computed it.