Can someone calculate the break even Analysis, thanks Break-even analysis. Poiss
ID: 2623968 • Letter: C
Question
Can someone calculate the break even Analysis, thanks
Break-even analysis. Poisson Calculators has found that it is indifferent between purchasing a high-capacity vacuum component assembly machine or a lower capacity machine as long as sales are 1,900 units per month. The price of each calculator is $70. The high-capacity machine has cash expenses of $100,000 per month and depreciation and amortization expenses of $30,000 per month, while the alternative has cash expenses of $30,000 per month and depreciation and amortization expenses of $5,000 per month. Under the low-capacity alternative, variable costs per unit are $60. If the firm bases its decisions on the Accounting Operating Profit Break-even, then what is the variable cost pre unit under the high-capacity alternative?
$70
$47
$60
$10
$70
Explanation / Answer
Operating profit with low capacity machine = no of units * (sale price - variable cost) - cash expenses - depreciation&amortization = 1900 * (70-60) - 30,000 - 5,000 = -16,000
Let variable cost of high capacity machine be X.
Operating profit with high capacity machine = no of units * (sale price - variable cost) - cash expenses - depreciation&amortization = 1900 * (70-X) - 100,000 - 30,000 = 1900 * (70-X) - 130,000
Equating the two, we have 1900 * (70-X) - 130,000 = -16,000
Solving, we get X = variable cost = $ 10
Answer: $ 10
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