You have been recently hired as a manager in one of the local Palestinian industries. The board of directors has assigned you the task having the options of purchasing 1, 2 or 3 computer-numerical control (CNC) machines from China. The Chinese supplier has provided you with the following information below:

(a) If you purchase one machine, the total annual costs will be 9,600 $ and the corresponding range of output will be between 0 and 300 units.

(b) If you purchase two machines, the total annual fixed costs will be 15,000 $ and the corresponding range of output is between 301 and 600 units.

(c) If you purchase three machines, the total annual fixed costs will be 20,000 S and the corresponding range of output is between 601 and 900 units. If you know that each unit to be produced on any machine costs $10 as a variable cost and incurs a unit revenue of $40.

1. What is the break-even point for each alternative (a), (b) and (c)?

2. If the forecasted demand in the local markets is between 580 and 660 units, how many CNC machines should be purchased from China? 

Answer rating: 100% (QA)

The breakeven point is the point at which total revenue equals total costs meaning there is neither ... View the full answer