26 CleanTech manufactures equipment to mitigate the A enviro

26 CleanTech manufactures equipment to mitigate the A environmental effects of waste G (a) If Product A has fixed expenses of $15,000 per year and each unit of product has a $0.20 vari- able cost, and Product B has fixed expenses of $5000 per year and a $0.50 variable cost, at what number of units of annual production will A have the same overall cost as B? (b) As a manager at CleanTech what other data would you need to evaluate these two products?

Solution

Total Cost = Fixed Cost + Variable cost

Let the no. of units be x

Now, for Product A

Total cost of Product A = 15000+0.2*x

Now, for Product B

Total cost of Product B = 5000+0.50*x

Now for finding number of units of annual production will Company A have the same overall cost as Company B

Total cost of Product A = Total cost of Product B

15000+0.2*x = = 5000+0.50*x

10000 = 0.3x

x = 33333.33 or 33334  number of units of annual production will Product A have the same overall cost as Product B.