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Two machines of the same production rate are available for use. On machine 1, the fixed cost is Rs. 100 and the variable cost is Rs. 2 per piece produced. The corresponding numbers for the machine are Rs. 200 and Rs. 1 respectively. For certain strategic reasons both the machines are to be used concurrently. The sale price of the first 800 units is Rs. 3.50 per unit & and subsequently it is only Rs. 3.00. The breakeven production rate for each machine is
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- 75
- 100
- 150
- 600
Correct Option: A
For Machine M1:
Fixed cost = Rs 100
Variable cost = Rs 2 per piece
For Machine M2:
Fixed cost = Rs 200
Variable cost = 1 Rs per piece
Total cost = Fixed cost + Variable cost × Number of units.
Total cost of production on machine M1 & M2 is
⇒ 100 + 2n + 200 + n = 300 + 2n
For the first 300 units, selling price is 3.50 Rs per unit.
So the break even point
300 + 3n = 3.50 (n+n)
300 + 3n = 3.50 (2 n)
7n = 300 + 3n = n = 75
