Managing Supply Chain and Operations 1st Edition by Thomas Foster ,Scott Sampson,Cynthia Wallin,Scott Webb

Exercise 5

A decision must be made between two different machines, A and B. The machines will produce the same product, but only one type of machine (either A or B) will be purchased. The company estimates that the selling price per unit for the product will be $30. The variable cost of production per unit if machine A is selected is believed to be $10. The variable cost of production if machine B is selected is believed to be $14. The fixed cost of machine A is $6,750,000, and the fixed cost of machine B is $5,000,000.
a. What is the break-even quantity if machine A is selected?
b. What is the break-even quantity if machinc B is selected?
c. If total demand for the product is believed to be 375,000 units, which machine will make the greater contribution to profit?