Jerry's Landscaping Wants to Increase Capacity by Adding a New

question 54

Multiple Choice

Jerry's Landscaping wants to increase capacity by adding a new tree cutting machine. The firm is considering proposals from Supplier A and Supplier B. The fixed costs for machine A are $250,000 and for machine B, $275,000. The variable cost for A is $75.00 per hour and for B, $60.00 per hour of operation. The revenue generated by the trees cut on these machines is $800 per tree. If the estimated output is 500 trees, which machine should be purchased?

• A) machine A
• B) machine B
• C) either machine A or machine B
• D) neither machine A nor machine B

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Definitions:

Departments

Distinct units within an organization, each focusing on a specific area of the business or a particular line of products or services.

Calculate

To determine or ascertain by mathematical methods; compute.

Direct Expense

Costs that can be directly attributed to a specific product, service, or department within a business.

Indirect Expense

Costs that are not directly attributable to a specific product or service, such as utilities or administrative salaries.