Question: A company is considering two possible operations: Operation 1: High fixed cost; low variable cost Operation 2: Low fixed cost; high variable cost Imagine comparing

A company is considering two possible operations:

Operation 1: High fixed cost; low variable cost

Operation 2: Low fixed cost; high variable cost

Imagine comparing the two operations using break-even analysis. Which of the following is a valid conclusion?

It is possible to compute a break-even quantity Q. This is a production target: The company should aim to produce exactly Q units.

It is possible to compute a break-even quantity Q. If the company plan on producing less than Q units, they should go with Operation 1. If they plan on producing more than Q units, they should go with Operation 2.

It is possible to compute a break-even quantity Q. If the company plan on producing less than Q units, they should go with Operation 2. If they plan on producing more than Q units, they should go with Operation 1.

It is not possible to compute a break-even quantity. Operation 1 is better no matter how many units the company plans on producing.

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