A company wants to buy a new machine to replace one, which is having frequent breakdown. It received offers for two models, M1 and M2. Further details regarding these two models are given below
|
Particulars |
M1 |
M2 |
|
Installed Capacity [Units] |
10, 000 |
10, 000 |
|
Fixed overheads per annum |
Rs.2, 40,000 |
Rs.1, 00,000 |
|
Estimated profit at the above capacity |
Rs.1, 60,000 |
Rs.1, 00,000 |
The product manufactured using this type of machine, M1 or M2, is sold at Rs.100 per unit. You are required to determine,
a. Break Even level of sales for each model.
b. The level of sales at which both the models will earn the same profit.
c. The model suitable for different levels of demand for the product.