Question: Quality Cement Ltd. intends to increase capacity by overcoming a quality issue through the addition of new equipment. Two vendors have presented proposals. The fixed

Quality Cement Ltd. intends to increase capacity by overcoming a quality issue through the addition of new equipment. Two vendors have presented proposals.

The fixed cost for proposal A is $50,000 and for proposal B $70,000.

The variable cost for proposal A is $12 and for B $10.00. The revenue generated by each unit is $20.00.

a) What is the break -even point in units for proposal A [5 Marks]

b) What is the break-even point in units for proposal B [5 Marks]

c) What is the break -even point in dollars for Proposal A [5 Marks]

d) What is the break -even point in dollars for proposal B [5 Marks]

Which proposal will you choose and why [5 Marks]

Use these formulas BEPx = Total fixed cost/pricevariable cost or (F/P-V) and BEP$ = Total fixed cost/1- variable cost /selling price or F/1-(v/p)

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