Assignment task: Matt's Manufacturing & Customs intends to increase their capacity by overcoming a bottleneck operation in its production company. Matt needs to add a new piece of equipment and has a choice to make between 2 suitable vendors who have each presented their proposal. Proposal A equipment will cost $45,000 to purchase, and $5,000 to install. Proposal B equipment will cost $60,000 to purchase, and $10,000 to install. The variable cost of production to operate Process A equipment is $12.00, and for Process, B equipment is only $9.00. Regardless of the chosen equipment, Matt can only sell the products produced for $20.00 each.
At what volume (units) of output would the two alternatives yield the same amount of profit? i.e. what is the point of indifference?