A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated.
Annual fixed costs would be dollar 36,000 for A and dollar 35,000 for B; variable costs per unit would be dollar 10 for A and dollar 11 for B; and revenue per unit would be dollar 19.
Determine each alternative's break-even point in units. (Round your answer to the nearest whole amount.)
Q_BEP, A units Q_BEP, B units At what volume of output would the two alternatives yield the same profit? (Round your answer to the nearest whole amount.)
Profit units If expected annual demand is 18,000 units, which alternative would yield the higher profit? Higher profit