1. A firm is considering three capacity alternatives: A, B, C.

Alternative A would have an annual fixed cost of Php 100,000 and

Alternative B annual fixed cost is 120,000 and variable cost is 20 per unit. On the other hand, alternative C fixed cost is 80,000
unit. Revenue is expected to be50 per unit.

1. Which alternative has the lowest break-even point? ANSWER: ALTERNATIVE A

SOLUTION

ALTERNATIVE A
100,000/(50-22)
BeP Units 3,571.43 units
3571.43 x 50
Bep Peso 178,571.43 peso

ALTERNATIVE B
120,000/(50-20)
BeP Units 4,000.00 units
4000*50
BeP Peso 200,000.00 peso

Alternative C
80,000/(50-30)
BeP Units 4,000.00 units
4,000*50
BeP Peso 200,000.00 peso

2.Which alternative will produce the highest profits for an annual output of 10,000 units? ANSWER : Alter

ALTERNATIVE A
profit (50 x 10,000) - 100,000-(22 x 10,000)
180,000.00

ALTERNATIVE B
profit (50 x 10,000) - 120,000-(20 x 10,000)
180,000.00

ALTERNATIVE C
profit (50 x 10,000) - 80,000-(30 x 10,000)
120,000.00

3.Which alternative will require the lowest volume of output to generate an annual profit of Php 50,000. ANSW
 3.Which alternative will require the lowest volume of output to generate an annual profit of Php 50,000. ANSW

ALTERNATIVE A
(50,000+100,000)/50-22
5,357.14 units

ALTERNATIVE B
(50,000+120,000)/50-20
5,666.67 units

ALTERNATIVE C
(50,000+80,000)/50-30
6,500.00 units
fixed cost of Php 100,000 and variable cost of Php22 per unit.
ternative C fixed cost is 80,000 with a variable cost of 30 per

NATIVE A

10,000 units? ANSWER : Alternative A and B

ual profit of Php 50,000. ANSWER ALTERNATIVE A

 FC VC
A 100,000.00 22.00
B 120,000.00 20.00
C 80,000.00 30.00

REVENUE 50.00