Use the following information to answer Questions 33 - 35
Sarah's Machinery Company is deciding to dump their current technology A for a new technology B with small fixed costs but big marginal costs.The current technology has fixed costs of $500 and marginal costs of $50 whereas the new technology has fixed costs of $250 and marginal costs of $100.
-What is the total cost at the break-even quantity calculated above?
A)$750
B)$850
C)$950
D)$1050

Question

Quizplus · Accepted Answer

The total cost at the break-even quantity is equal to the fixed costs plus the marginal costs times the break-even quantity. The break-even quantity is calculated as the fixed costs of the old technology minus the fixed costs of the new technology divided by the difference in marginal costs. In this case, the break-even quantity is (500 - 250) / (100 - 50) = 5. The total cost at the break-even quantity is therefore 250 + 100 * 5 = 750.

Use the Following Information to Answer Questions 33 - 35