Use the breakeven model to determine which of the statements below is TRUE according to the information provided in the table relating to two different locations considered for a new manufacturing facility.
$\begin{array}{c}
\begin{array}{c}
\text { LOCATION}\
\hline \text { Site A}\
\text { Site B}\
\end{array}
\begin{array}{c}
\text { ANNUAL FIXED COSTS}\
\hline\$ 50,000 \
\$ 20,000
\end{array}
\begin{array}{c}
\text { UNIT VARIABLE COSTS}\
\hline\$ 10 \
\$ 30
\end{array}
\end{array}$

A) Site A is the desired location if the production rate is 1000 units per year
B) The breakeven point for these two locations is 1500 units per year
C) Site B is the desired location if the production rate is 2000 units per year
D) The breakeven point for these two locations is 500 units per year

Question

Use the breakeven model to determine which of the statements below is TRUE according to the information provided in the table relating to two different locations considered for a new manufacturing facility.
$\begin{array}{c}
\begin{array}{c}
\text { LOCATION}\
\hline \text { Site A}\
\text { Site B}\
\end{array}
\begin{array}{c}
\text { ANNUAL FIXED COSTS}\
\hline\$ 50,000 \
\$ 20,000
\end{array}
\begin{array}{c}
\text { UNIT VARIABLE COSTS}\
\hline\$ 10 \
\$ 30
\end{array}
\end{array}$

A) Site A is the desired location if the production rate is 1000 units per year
B) The breakeven point for these two locations is 1500 units per year
C) Site B is the desired location if the production rate is 2000 units per year
D) The breakeven point for these two locations is 500 units per year

Quizplus · Accepted Answer

The breakeven point is calculated by equating the total costs of both sites: $50000 + 10x = 20000 + 30x$. Solving for $x$ gives 1500 units.

Use the Breakeven Model to Determine Which of the Statements