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Markland Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two...

Markland Manufacturing intends to increase capacity by overcoming a bottleneck operation by adding new equipment. Two vendors have presented proposals. The fixed costs are $60,000 for proposal A and $75,000 for proposal B. The variable cost is $14.00 for A and $11.00 for B. The revenue generated by each unit is $20.00.

1. Vendor A and Vendor B have the same cost when the output volume​ = ___ units? round to nearest whole number ​

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Answer #1

INDIFFERENCE POINT = (FIXED COST A - FIXED COST B) / (VARIABLE COST B - VARIABLE COST A)

FIXED COST A = 60000
VARIABLE COST A = 14
FIXED COST B = 75000
VARIABLE COST B = 11

INDIFFERENCE POINT = (60000 - 75000) / (11 - 14) = 5000


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