Tuesday, June 21, 2011
Determine each alternative’s break-even point in unit
i) Determine each alternative’s break-even point in unit
ii) At what volume of output would the two alternatives yield the same profit?
iii) If expected annual demand is 300000 units, which alternative would yield the higher profit?
Solution.
(i) Break even point = fixed cost/contribution per unit
Alternative:
A= 8400000 / (180 - 120) = 140000 units
B= 6000000 / (200 - 150) = 120000 units
(ii) Let the level at which the two alternative yield same profit is ‘X’
Profit:
A = X * 60 - 84,00,000
B = X * 50 - 60,00,000
60X - 84,00,000 = 50X - 60,00,000
10X = 24,00,000
X = 24,00,000/10
X = 2,40,000 units
(iii) Profit when demand is 3,00,000 units
A = 3,00,000 x 60 - 84,00,000 = 96,00,000
B = 3,00,000 x 50 - 60,00,000 = 90,00,000
A yields higher profit
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- January 5, 2012 at 9:50 AM
- Jithin MathYou said...
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- February 26, 2019 at 12:35 AM
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