Problem $1$:

An operation is evaluating the acquisition of new machinery. Three alternatives have been

identified:

Alternative Fixed Annual Cost Variable Costs

A $$100,000$ $$20$

B $$200,000$ $$5$

C $$150,000$ $$7\mathrm{.}50$

$$ Determine break$-$even quantity for each pair of alternatives. Construct the graph to

represent those points. It should be only one graph with all the corresponding lines on it

$$ Determine the ranges of production $($units per year$)$ over which each alternative will be

recommended $($The production capacity is $30,000$ units per year$)$

Note: The $$break$-$even$$ concept is generally related to the point where revenues and costs are

equal, but it can also be applied to the level of activity where two alternatives are equal, in terms of

costs, revenues or profit.