Question

Sherwin Song Company must implement a manufacturing process that reduces the amount of particulates emitted into the atmosphere. Two processes have been identified that provide the same level of particulate reduction. The first process is expected to incur $190,000 of fixed cost and add $79 of variable cost to each casting Spartan produces. The second process has fixed costs of $100,000 and adds $100 of variable cost per casting. What is the break-even quantity beyond which the first process is more attractive? _______ units. (Enter your response rounded to nearest whole number.)

Answer 1

Answer:

Break-even point= 4285.71

Explanation:

Giving the following information:

The first process (A):

Fixed costs= $190,000

Variable costs= $79.00

The second process (B):

Fixed costs= $100,000

Variable costs= $100.00

Total costs A= 190,000+79*q

Total costs B= 100,000+100*q

Break-even point:

100,000*100q=190,000+79*q

21q=90,000

q= 4285.71

Total costs A= 190,000+79*4285.71= $528,571

Total costs B= 100,000+100*4285.71= $528,571