SolarFlex produces the Flex $1000$ solar panel at a small factory located in the outskirts of Lake Country. The factory has equipment and machinery; some of which was purchased from a leading industry manufacturer and the rest was leased from various suppliers. Currently, SolarFlex purchases about $60\%$ of the parts that make up the Flex $1000$ photovoltaic panel.

Ms$.$ Zahen and the rest of the SolarFlex management team has decided that it must reconfigure its manufacturing process in order to remain competitive. They are considering a plan to increase the number of purchased parts $($to about $80\%)$ and to reduce the complexity of the manufacturing process. This would allow SolarFlex to discontinue use of the leased equipment and to generate cash by selling some of the purchased equipment currently used in the plant.

The manufacturing and general, selling and administration $($GSA$)$ costs for producing and selling $380,000$ units of the Flex $1000$ are as follows:

Current output $($units$)380,000$ per year

Per$-$Unit Costs @ $380,000$ units per year

Cost Items Current Proposed

Materials and purchased parts $$180\mathrm{.}00$ $$195\mathrm{.}00$

Direct labor $$55\mathrm{.}00$ $$62\mathrm{.}50$

Variable factory overhead $$70\mathrm{.}00$ $$80\mathrm{.}00$

Fixed factory overhead $$90\mathrm{.}00$ $$55\mathrm{.}00$

Selling Price per unit $$600\mathrm{.}00$

Variable GSA per unit $$25\mathrm{.}00$

Fixed GSA $($per year$)$ $$2,050,000($not expected to change under either plan$)$

GSA $=$ General, selling and administrative costs

a$.$ Calculate the breakeven point in both units and dollars for the Flex $1000$ panel, both before and after the proposed reengineering project. Assume all setup costs are included in fixed factory overhead.

Answer rating: 100% (QA)

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