Solve breakeven problem, Operation Management

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Breakeven Problem

1. Avila Manufacturing plans to increase capacity by adding new equipment. They have received two proposals.

Fixed CostVariable Cost/Unit

Proposal A $32,000 $12.00

Proposal B $50,000 $10.00

The revenue generated by each unit is $20.00.

a. What is the break-even point in units (when profit = zero) for Proposal A?

b. What is the break-even point in units (when profit = zero) for Proposal B?

c. Draw the lines represented by both Proposal A and B on an X-Y coordinate graph with Units on the X axis and Profits on the Y axis.
Use the form y = mx + b or

Profit = (Revenue/unit - Variable cost/unit) * Units - Fixed Cost


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