What is the break even quantityif the cost of manufacture is the same whichever method is used if A is a fixed cost of 40000 and a variable of 23 and b has a fixed cost of 52000?

1 Answer

Answer :

There question is incomplete:There is no variable cost given for manufacturing method B. I'll assume it is b.It is unclear as to quantity for which the cost of manufacturing by both methods is the same. I'll assume it is the break-even quantity.The break even point is when the revenue from sales = cost of manufactureSo the question is asking for what quantity is the cost of manufacture using method A equal to the cost of manufacture using method B.cost of manufacture = fixed cost + variable cost × quantityMethod A: manufacturing cost = 40,000 + 23 × quantityMethod B: manufacturing cost = 52,000 + b × quantity→ 40,000 + 23 × quantity = 52,000 + b × quantity→ 23 × quantity - b × quantity = 52,000 - 40,000→ quantity(23 - b) = 12,000→ quantity = 12,000/(23 - b)I'll let you fill in the value of b; if b has no variable cost, b = 0.

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