Two automatic systems for dispensing maps are being compared by the state highwa
ID: 1239071 • Letter: T
Question
Two automatic systems for dispensing maps are being compared by the state highway department. The accompanying breakeven chart of the comparison of these systems (System I vs. System II) shows total yearly costs for the number of maps dispensed per year for both alternatives. Answer the following questions:a) What is the fixed cost for System I and System II.
b) What is the variable cost per map dispensed for System I and System II.
c) What is the break even point in terms of maps dispensed at which the two systems have equal annual costs.
d) For what range of annual number of maps dispensed is system I or system II recommended.
Explanation / Answer
Two automatic systems for dispensing maps are being compared by the state highway department.
The total cost for system 1 is y1 = 0.9 x + 1.0, and the total cost for system 2 is y2 = 0.1 x + 5.
(a) What are the fixed and variable costs for system 1?
Variable cost = 0.9 Fixed cost = 1
(b) What are the fixed and variable costs for system 2?
Variable cost = 0.1 Fixed cost = 5
(c) What is the number of maps dispensed at which the two systems have equal annual costs?
0.9 x + 1.0 = 0.1 x + 5 0.8x = 4 x=5
(d) For what range of annual number of maps dispensed is system 1 recommended?
0,5