A firm is considering three capacity alternatives:
A,B,and C.Alternative A would have an annual fixed cost of $100,000 and variable costs of $22 per unit.Alternative B would have annual fixed costs of $120,000 and variable costs of $20 per unit.Alternative C would have fixed costs of $80,000 and variable costs of $30 per unit.Revenue is expected to be $50 per unit.
(i)Which alternative has the lowest break-even quantity?
(ii)Which alternative will produce the highest profits for an annual output of 10,000 units?

Question

A firm is considering three capacity alternatives:
 A,B,and C.Alternative A would have an annual fixed cost of $100,000 and variable costs of $22 per unit.Alternative B would have annual fixed costs of $120,000 and variable costs of $20 per unit.Alternative C would have fixed costs of $80,000 and variable costs of $30 per unit.Revenue is expected to be $50 per unit.
(i)Which alternative has the lowest break-even quantity?
(ii)Which alternative will produce the highest profits for an annual output of 10,000 units?

Quizplus · Accepted Answer

The Answer of A firm is considering three capacity alternatives:
 A,B,and C.Alternative A would have an annual fixed cost of $100,000 and variable costs of $22 per unit.Alternative B would have annual fixed costs of $120,000 and variable costs of $20 per unit.Alternative C would have fixed costs of $80,000 and variable costs of $30 per unit.Revenue is expected to be $50 per unit.
(i)Which alternative has the lowest break-even quantity?
(ii)Which alternative will produce the highest profits for an annual output of 10,000 units?

A Firm Is Considering Three Capacity Alternatives