Assume that you and your sister plan to open a business that will make and sell

Question

Assume that you and your sister plan to open a business that will make and sell a newly designed type of flip-flops. By automating the process, you can be profitable making the product in the U.S. Two robotic machines are available to make the flip-flops, Machine A and Machine B. The price per pair will be $20.00 no matter which machine is used. The fixed and variable costs associated with the two machines are shown below. What is the difference between the break-even points for Machines A and B? (Hint: Find BEB - BEA) Machine A Machine B Price per pair (P) $20.00 $20.00 Fixed costs (F) $25,000 $100,000 Variable cost/unit (V) $7.00 $4.00

Explanation / Answer

breakeven point=fixed cost/(saving-variable cost) using this formula for machine B BEB=6.25*1000$ and for machine A BEA=1.92*1000$ finally the difference is BEB-BEA=4330$

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