Question: Acme Company currently leases a machine for making widgets. Lease expense is $16,000/month. Fixed costs of operation are $3,000/month, and variable cost per widget is

Acme Company currently leases a machine for making widgets. Lease expense is $16,000/month. Fixed costs of operation are $3,000/month, and variable cost per widget is $186. They are thinking of switching over to a lease on a more advanced model of machine, for which the lease expense would be $24,000/month. Fixed costs of operation would be unchanged, but because the new machine is more efficient, variable cost per widget would be $178. What is the monthly widget production volume at which the new machine would have no effect on Acme’s profit [i.e., what is the breakeven point for this proposed acquisition]?

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