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Copy of An operations manager is considering three different production systems for the following year. System...

Copy of An operations manager is considering three different production systems for the following year. System A has a fixed cost of $30,000 and a variable cost of $10 per unit. System B has a fixed cost of $15,000 and a variable cost of $20 per unit. The third option is outsourcing, which has a cost of $40 per unit. At what range of volume the System B is most economical?

a. 750 and above

b. 750 to 1000

c. 750 to 1500

d. 1000 and above

e. 1000 to 1500

business   Operations-Management   
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Answer #1

Break-even analysis is a technique by which business identify the sales volume when the total cost and total revenue is equal. So, the company neither makes profit nor loss.

Break-even analysis is important for business because it help in drafting good business plan by determining cost structure and the volume required to cover the cost in order to make profit.

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