Shawn Pen & Pencil Sets Inc. has fixed costs of $421,400. Its product currently sells for $18 per unit and has variable costs of $8.20 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $440,000 and drive up fixed costs to $563,500. Although the price will remain at $18 per unit, the increased automation will reduce costs per unit to $5.75. a. Compute the following break-even points: i. Current break-even point ii. Proposed new break-even point b. As a result of Bic's suggestion, will the break-even point go up or down? N

Shawn Pen & Pencil Sets Inc. has fixed costs of $421,400. Its product currently sells for $18 per unit and has variable costs of $8.20 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $440,000 and drive up fixed costs to $563,500. Although the price will remain at $18 per unit, the increased automation will reduce costs per unit to $5.75. a. Compute the following break-even points: i. Current break-even point ii. Proposed new break-even point b. As a result of Bic's suggestion, will the break-even point go up or down? N

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 5E

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