The Clutch Engineering Company is proposing to locate a branch office in one of two West Coast locations, A and B. These two sites have quite different estimated operating costs:

A B

Engineering labor cost $15/hr. 16/hr.

Materials and supplies $2.40/hr. $1.80/hr

(tied to engineering hours)

Variable overhead 5.50/hr. 4.40/hr.

Total annual fixed cost $150,000 $190,000

Price to customers $30 $30

Consider the hourly costs to be variable costs

a. Compute the break-even for both locations.

b. At what level of output (number of hours) are you indifferent to the location?

• I. Total Fixed Cost __________________________
• Selling Price _____________________________
• Variable Cost _______________________________
• Break Even Units _____________________________
• Break Even $_________________________________
• II. Total Fixed Cost____________________________
• Selling Price _______________________________
• Variable Cost _______________________________
• Break Even Units ______________________________
• Break Even $ __________________________________
• III. Fixed Cost Alternative 1 _________________________________
• Fixed Cost Alternative 2 __________________________________
• Variable Cost Alternative 1 _______________________________
• Variable Cost Alternative 2 _______________________________
• Answer __________________________________