In Example 16.7, it turns out that the new process does not save one cent per unit. It only saves 0.3 cents per unit. What is the new BEP, and was it worth the expense to make this improvement?

Example 16.7

An engineer proposes an improvement to an existing process. The cost required to make this process improvement (PI) is $100,000. Suppose the process makes 100,000 widgets/day. If the proposed process improvement saves one cent per unit ($0.01/unit), what is its BEP for the PI?

Need: BEP = ______ for a process improvement costing $100,000 assuming you are selling 100,000 widgets/day with a process improvement savings of $0.01/widget.

Know–How: You will save 100,000 [widgets/day] x 0.01 [$/widget] = $1,000/day with the new and improved widget manufacture.