Company Y is considering two production technologies,Bronze and Platinum,for producing its new product.The cost structures of the two technologies are as follows:
$$\begin{array} { | l | r | r | }
\hline & \text { Bronze } & \text { Platinum } \
\hline \text { Selling price per unit } & \$ 150 & \$ 150 \
\hline \begin{array} { l }
\text { Variable production costs } \
\text { per urit }
\end{array} & \$ 120 & \$ 50 \
\hline \text { Total fixed production costs } & \$ 300,000 & \$ 1,210,000 \
\hline
\end{array}$$
At what level of sales volume in units (rounded to the nearest whole unit)would Company Y be indifferent in choosing between the Bronze and Platinum technologies?
A) 10,000 units.
B) 12,100 units.
C) 13,000 units.
D) Cannot be determined without additional information.

Question

Company Y is considering two production technologies,Bronze and Platinum,for producing its new product.The cost structures of the two technologies are as follows:
$$\begin{array} { | l | r | r | } 
\hline & \text { Bronze } & \text { Platinum } \
\hline \text { Selling price per unit } & \$ 150 & \$ 150 \
\hline \begin{array} { l } 
\text { Variable production costs } \
\text { per urit }
\end{array} & \$ 120 & \$ 50 \
\hline \text { Total fixed production costs } & \$ 300,000 & \$ 1,210,000 \
\hline
\end{array}$$
At what level of sales volume in units (rounded to the nearest whole unit)would Company Y be indifferent in choosing between the Bronze and Platinum technologies?
A) 10,000 units.
B) 12,100 units.
C) 13,000 units.
D) Cannot be determined without additional information.

Quizplus · Accepted Answer

The indifference point is where total costs for both technologies are equal. Set up the equation: $300,000 + 120x = 1,210,000 + 50x$. Solving for $x$, we get $x = 13,000$ units.

Company Y Is Considering Two Production Technologies,Bronze and Platinum,for Producing