Given the price and cost data shown in the following table of each of the two firms A and B, find the breakeven point. Firm .......Sales price ..Variable operating   Fixed operating cost ................per unit      ..cost per unit A .............16.00                6.75                      24,600 B ..............20.00               9.75                      30,600 What is the operating breakeven point in units for each firm?

Expert Answers

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From the information provided, we can see that the fixed operating cost for Firm A is 24600 and that for Firm B is 30600. The variable operating cost per unit is 6.75 for firm A and 9.75 for firm B. Firm A is able to sell each unit at 16 and Firm B at 20.

Let the number of units to be manufactured by firm A for breakeven be equal to A.

So we have 16*A = A*6.75 + 24600

=> A( 16 - 6.75) = 24600

=> A* 9.25 = 24600

=> A = 24600/ 9.25

=> A = 2660

Therefore Firm A should manufacture 2660 units for break even.

Similarly for Firm B, let the units to be manufactured for breakeven be equal to B.

20*B = 9.75*B + 30600

=> B(20 - 9.75) = 30600

=> B*10.25 = 30600

=> B = 30600/10.25

=> B = 2986

Therefore Firm B should manufacture 2986 units for break even.

Approved by eNotes Editorial Team

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