A company is considering two alternative technologies for manufacturing a product. The cost data are shown below. $\begin{array}{|l|c|c|}
\hline & \text { A } & \text { B } \
\hline \text { Fixed Cost } & \$ 10,000 & \$ 25,000 \
\hline \text { Variable Cost } & \$ 30 / \text { unit } & \$ 5 / \text { unit } \
\hline
\end{array}$ The breakeven volume is _____.
A) less than or equal to 200 units
B) more than 200 but less than or equal to 300 units
C) more than 300 but less than or equal to 400 units
D) more than 400 units

Question

Quizplus · Accepted Answer

The breakeven volume is calculated by finding the point where the total costs of both technologies are equal. This can be done by setting the total cost equations equal to each other and solving for the volume (V). For technology A, the total cost is $10,000 + $30V, and for technology B, it is $25,000 + $5V. Setting these equal to each other: $10,000 + $30V = $25,000 + $5V. Solving for V gives V = 500 units, which is more than 400 units.

A Company Is Considering Two Alternative Technologies for Manufacturing a Product