Problem 5-12 A manager must decide how many machines of a certain type to purcha
ID: 346937 • Letter: P
Question
Problem 5-12 A manager must decide how many machines of a certain type to purchase. Each machine can process 100 customers per day. One machine will result in a fixed cost of $2,100 per day, while two machines will result in a fixed cost of $3,700 per day. Variable costs will be $16 per customer, and revenue will be $45 per customer a. Determine the break-even point for each range. (Round your answers to the next whole number.) One machine Two machines b. If estimated demand is 90 to 120 customers per day, how many machines should be purchased? (Click to select)Explanation / Answer
a. One machine costs $2,100 + $16x per day. Revenue is $45x. Net Profit is
= 45x - ($2,100 + $16x)
Let x be the number of customers.
The breakeven point is where that equals 0.
45x - ($2,100 + $16x) = 0
45x - 16x - $2,100 = 0
29x = $2,100
x = 73
Breakeven point at one machine is 73
For two machine:
45x - ($3,700 + $16x) = 0
45x - 16x - $3,700 = 0
29x = $3,700
x = 128
The breakeven point for two machine is 128
b. One machine
Explanations: The manager should be purchased one machine. Between 90 and 100 customers per day, the manager can make a profit. However with two machine will never make a profit as the breakeven volume is 128 customers.