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?
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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.
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