A manager must decide how many machines of a certain type to purchase. Eachmachine can process 100 customers per day. One machine will result in a fixedcost of $2,000 per day, while two machines will result in a fixed cost of $3,800 perday. Variable costs will be $20 per customer, and revenue will be $45 percustomer.a.Determine the break-even point for each range.OnemachineTwomachines.b.If estimated demand is 90 to 120 customers per day, how many machinesshould be purchased?A.One machineB. Two machines

To Calculate:A. Breakeven point for each rangeB. Number of machines to be purchasedGiven:Fixed cost…

Answered: a. Determine the break-even point for…

a. Determine the break-even point for each range. One machine Two machines b. If estimated demand is 90 to 120 customers per day, how many machines should be purchased? A.One machine B. Two machines

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.1IP

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Concept explainers

Profit Maximization

Economic activity is related to the use of scarce resources of the economy that are used for producing goods and services which are required to satisfy various demands of the people. In other words, it can be said that it is all about satisfying the unlimited demands of individuals with the limited resources available. The production decision is taken by the producers or the firms. In economics, the terms ‘producers’, ‘suppliers’, and ‘firms’ are interchangeable. Now the question arises, what does a firm actually mean?

Question

A manager must decide how many machines of a certain type to purchase. Each
machine can process 100 customers per day. One machine will result in a fixed
cost of $2,000 per day, while two machines will result in a fixed cost of $3,800 per
day. Variable costs will be $20 per customer, and revenue will be $45 per
customer.
a.
Determine the break-even point for each range.
One
machine
Two
machines.
b.
If estimated demand is 90 to 120 customers per day, how many machines
should be purchased?
A.One machine
B. Two machines

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