Understanding Business
12th Edition
ISBN: 9781259929434
Author: William Nickels
Publisher: McGraw-Hill Education
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Question
Gary’s Seasoning wants to increase its capacity by adding more blending and packaging
machines. Two vendors have presented proposals. Vendor A’s equipment costs $11,500 and the
variable cost per unit is $2.00. Vendor B’s equipment costs $13,500 and the variable cost per unit
is $1.75. Selling price for each seasoning packet for $4.00.
a. What is the break-even point for each proposal?
b. If the expected volume is 7,500 packages, which vendor should be chosen? (Show all
calculations to earn full credit)
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