Break-even Point.docx

Manufacturing Processes: Break-Even Point/Cross-over Point Question 1: Assume a fixed cost for a process of $120,000. The variable cost to produce each unit of product is $35, and the selling price for the finished product is $50. What is the number of units that must be produced and sold to break even?

Question 2: Suppose that you have two machines X and Y for producing a widget. Machine X has a fixed cost of $25,000 and per unit variable cost of $300.00. Machine Y has a fixed cost of $30,000 and per unit variable cost is $325.00. The widget sells for $425 regardless of production process used. During the next three years (your planning horizon for the widgets) you expect the economy to be pretty good with sales of widgets to be at least 700 units per year. Explain what will happen after 3 years and which machine you will choose? Show you answer with support by break-even point graph (cross-over point graph).