Process X is estimated to have a fixed cost of $30,000 per year and a variable cost of $60 per unit in year 1, decreasing by $5 per unitper year thereafter. Process Y will have a fixed cost of $71,000 per year and a variable cost of $10 per unit in year 1, increasing by $1per unit per year thereafter. At an interest rate of 12% per year, how many units must be produced in year 8.000 for the two processesto break even?The number of units that must be produced is determined to be

Given thatfixed cost = $30000 per year,variable cost is $60 per unit,variable cost decreases by $5…

Answered: The number of units that must be…

Business

Economics

The number of units that must be produced is determined to be

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Process X is estimated to have a fixed cost of $30,000 per year and a variable cost of $60 per unit in year 1, decreasing by $5 per unit
per year thereafter. Process Y will have a fixed cost of $71,000 per year and a variable cost of $10 per unit in year 1, increasing by $1
per unit per year thereafter. At an interest rate of 12% per year, how many units must be produced in year 8.000 for the two processes
to break even?
The number of units that must be produced is determined to be

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Step 1: Let us find total cost for process X

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Step 2: Let us find total cost for process Y

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Step 3: Now let us equate the total costs in year 8 of both processes

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