A manufacturing company has decided to increase the capacity of its bottleneck operation by adding a new machine. They have identified two alternatives, A and B. Machine A would incur fixed costs of $200,000 per year, and variable costs per unit would be $50. For Machine B, the fixed costs would be $130,000 per year, with variable costs of $80 per unit. For both the revenue per unit is $150.
a. What is the break-even point in units for each alternative?
b. At what volume of output would the company be indifferent between the two choices?
c. If expected annual demand is 2,000 units, which should the company choose?