Question 1
Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for machine A are $90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. The break-even point for machine A is
◦ $15,000 dollars.
◦ $90,000 dollars.
◦ 90,000 units.
◦ 15,000 units.
◦ cannot be calculated from the information provided.
Question 2
A fabrication company wants to increase capacity by adding a new machine. The firm is considering proposals from vendor A and vendor B. The fixed costs for machine A are $90,000 and for machine B, $75,000. The variable cost for A is $15.00 per unit and for B, $18.00. The revenue generated by the units processed on these machines is $21 per unit. If the estimated output is 5000 units, which machine should be purchased?
◦ machine A
◦ machine B
◦ no purchase because neither machine yields a profit at that volume
◦ purchase both machines since they are both profitable
◦ either machine A or machine B
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