Question: Create a profit model in Excel for each of the three alternatives
Put all three models, side by side in one worksheet.
Use your models to find the answers to the questions.
A firm is considering three capacity alternatives: A, B, and C.
Alternative A would have an annual fixed cost of $100,000 and variable costs of $22 per unit.
Alternative B would have annual fixed costs of $120,000 and variable costs of $20 per unit.
Alternative C would have fixed costs of $80,000 and variable costs of $30 per unit.
Revenue is expected to be $50 per unit.
(A) Which alternative has the lowest break-even quantity?
(B) Which alternative will produce the highest profits for an annual output of 10,000 units?
(C) Which alternative would require the lowest volume of output to generate an annual profit of $50,000?