Question

Sroufe Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors have presented proposals. The fixed costs are $50,000 for proposal A and $70,000 for proposal B. The variable cost is $12.00 for A and $10.00 for B. The revenue generated by each unit is $20.00, 

a) The break-even point in units for the proposal by Vendor A-units (enter your response as a whole number).

Answer 1

Solution:

We know the fixed cost for proposal A is $50,000, Variable cost is $12.00 and Revenue per unit is $20.00.

Therefore, the break-even point is:

Answer 2

Contribution Margin per unit for Vendor A($20.00-$12.00)	$                           8.00
Fixed Costs of Vendor A	$                       50,000
Break-even point in units($50,000/$8)	6250 units