A manufacturing company is considering two capacity expansion alternatives, purchasing new machinery and upgrading existing machinery,...

Transcribed Image Text:

A manufacturing company is considering two capacity expansion alternatives, purchasing new machinery and upgrading existing machinery, to accommodate the growing demand for their most popular medical device. The costs associated with each alternative are provided below. Alternative Purchase New Machinery Upgrade existing machinery Fixed Costs $860,000 $612,500 Variable Costs $30/unit $45/unit If this device is currently sold for $80/unit, answer the following questions. a) What is the break-even sales volume for each alternative? b) What is the profit or loss for each alternative if the projected sales volume is 16,000 units? c) If the sales price was increased to $90/unit, what alternative would you recommend? A manufacturing company is considering two capacity expansion alternatives, purchasing new machinery and upgrading existing machinery, to accommodate the growing demand for their most popular medical device. The costs associated with each alternative are provided below. Alternative Purchase New Machinery Upgrade existing machinery Fixed Costs $860,000 $612,500 Variable Costs $30/unit $45/unit If this device is currently sold for $80/unit, answer the following questions. a) What is the break-even sales volume for each alternative? b) What is the profit or loss for each alternative if the projected sales volume is 16,000 units? c) If the sales price was increased to $90/unit, what alternative would you recommend?

Answer rating: 100% (QA)

a Breakeven sales volume for each alternative can be calculated by equating the total revenue to the ... View the full answer