A small firm intends to increase the capacity of a bottleneck operation by adding a new machine. Two alternatives, A and B, have been identified, and the associated costs and revenues have been estimated. Annual fixed costs would be $36,000 for A and $31,000 for B; variable costs per unit would be $7 for A and $11 for B; and revenue per unit would be $17.

a. Determine each alternative’s break-even point in units. (Round your answer to the nearest whole amount.)

QBEP,A ___units

QBEP,B ___units

b. At what volume of output would the two alternatives yield the same profit? (Round your answer to the nearest whole amount.)

Profit _____units

c. If expected annual demand is 14,000 units, which alternative would yield the higher profit?

Higher ______profit