Joe’s Machine Shop has identified the grinding station as its key bottleneck and has identified two options for expansion. The Grinder 1000 has fixed costs of $20,000 and $10 per unit variable costs. The Grinder 2000 has fixed costs of $40,000 and $8 per unit variable costs. Revenue per unit is projected to be $16.
a. Determine the break-even point for each alternative.
b. At what volume of output would the two alter- natives yield the same profit?
c. If demand is 13,000 units, which option yields a higher profit? How much?