Juan Alavanca is evaluating the risk of two companies in the machinery industry: The Gearing Company and Hebelkraft, Inc. Alavanca used the latest fiscal year’s financial statements and interviews with managers of the respective companies to gather the following information:

Based on this information, the breakeven points for The Gearing Company and Hebelkraft, Inc. are:
A. 0.75 million and 1.1 million units, respectively.
B. 1 million and 1.5 million units, respectively.
C. 1.5 million and 0.75 million units, respectively.

Transcribed Image Text:

Number of units produced and sold Sales price per unit Variable cost per unit The Gearing Company 1 million $200 $120 $40 million Fixed operating cost Fixed financing expense $20 million Hebelkraft, Inc. 1.5 million $200 $100 $90 million $20 million