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Stapleton Manufacturing intends to increase capacity through the addition of new equipment. Two vendors have presented proposals. The fixed cost for proposal A is ​$57 comma 000​, and for proposal​ B, ​$31 comma 000. The variable cost for A is ​$12​, and for​ B, ​$16. The revenue generated by each unit is ​$18. ​a) What is the crossover point for the two​ options? The crossover point for the two options is nothing units. ​(Round your response to the nearest whole​ number.) ​b) At an expected volume of 4 comma 600 ​units, which alternative should be​ chosen? The profit​ (loss) if proposal A is accepted and 4 comma 600 units are produced is ​$ nothing. ​(Round your response to the nearest dollar and include a minus sign if​ necessary.) The profit​ (loss) if proposal B is accepted and 4 comma 600 units are produced is ​$ nothing. ​(Round your response to the nearest dollar and include a minus sign if​ necessary.) ▼ Proposal A Proposal B should be chosen at an expected volume of 4 comma 600 units.

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Answer:

Instructions are below.

Explanation:

Giving the following information:

Proposal A:

Fixed costs= $57,000

Variable cost per unit= $12

Proposal B:

Fixed costs= $31,000

Variable cost per unit= $16

A) First, we need to determine the cost formula for each proposal:

Proposal A= 57,000 + 12*x

Proposal B= 31,000 + 16*x

Now, to calculate the indifference point we need to equal both formulas and isolate X (number of units).

57,000 + 12x = 31,000 + 16x

26,000 = 4x

6,500= x

The indifference is 6,500 units. We can corroborate.

Proposal A= 57,000 + 12*6,500= $135,000

Proposal B= 31,000 + 16*6,500= $135,000

B) We need to determine the cheapest option at 4,600 units.

Proposal A= 57,000 + 12*4,600= $112,200

Proposal B= 31,000 + 16*4,600= $104,600

At this level of units, the best option is Proposal B.