Question

The fixed and variable costs​ (in U.S.​ dollars) for the new recycling plant that Eldon Yi is opening in Australia are computed as​ follows: Cost Victoria Perth Fixed ​$1,000,000 ​$800,000 Variable ​$73/unit ​$112/unit ​a) Over what range is each city​ preferable?
1. Victoria is preferable when the number of units is (more/less) than ____? ​(enter your response as a whole​ number).
2. Perth is preferable when the number of units is (more/less) than_____? (enter your response as a whole​ number).

Answer 1

Answer:

1. If the units are more than the 5,129 units, than the Victoria is better

2. If the units are less than the 5,129 units, than the Perth is better

Explanation:

In this question, we have to compute the break even units by taking the difference of fixed cost and the variable cost which is shown below:

Break even points = Change in fixed cost ÷ change in variable cost per unit

where,

Change in fixed cost = $1,000,000 - $800,000 = $200,000

Change in variable cost per unit = $112 - $73 = $39

Now put these values to the above formula  

So, the value would equal to

= $200,000 ÷ $39 per unit

= 5,129 units

If the units are more than the 5,129 units, than the Victoria is better

If the units are less than the 5,129 units, than the Perth is better