As a manager, you must choose between two options for new production equipment:

Option A: Machine A will increase fixed costs by a substantial margin but will produce greater sales volume at the current price.

Option B: Machine B will only slightly increase fixed costs but will produce considerable savings on variable cost per unit. No additional sales are anticipated if Machine B is selected.

Answer the following questions:

1. What are the relative merits of both machines?
2. How could you go about analyzing which machine is the better investment for the company in terms of both net operating income and break-even?