Question: Shawn Pen Pencil Sets Inc has fixed costs of

Shawn Pen & Pencil Sets Inc. has fixed costs of $80,000. Its product currently sells for $5 per unit and has variable costs of $2.50 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $400,000 and drive up fixed costs to $120,000. Although the price will remain at $5 per unit, the increased automation will reduce costs per unit to $2.00.
As a result of Bic’s suggestion, will the break-even point go up or down? Compute the necessary numbers.

View Solution:

Sale on SolutionInn
  • CreatedOctober 14, 2014
  • Files Included
Post your question