Question

Alternative     Annual Fixed Cost   Annual Variable Cost per Unit A                          $50,00

Alternative     Annual Fixed Cost   Annual Variable Cost per Unit

A                          $50,000                    $20

B                          $100,000                  $10

Vegas Herman In. is investigating implementing some new production machinery as a part of its operations. Two alternatives have been found, and they have the following fixed & variable costs. What is the break-even point (which means break-even output)?                       

a. 5,000.                              

b. 6,000.                              

c. 7,000.                               

d. 8,000.

Business   Accounting   
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Answer #1
Break even utput in units an be formulated in forllowing equation
Assume number of units as X
Fixed cost of A + (number of units * variable cost of A) =Fixed cost of B+ (number of units * variable cost of B)
$50000+($20*X) =$100000+($10*X)
50000+20X =100000+10X
10X =$50000
X =50000/10
X =5000
Correct Answer = a.5000
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