Hello,

Please answer the problem below SHOWING SOLUTIONS to each questions. If possible, please answer completely in a MS WORD document.

Dexter and Deedees Grocery is manufacturing a store brand chocolate bar that has a variable cost of $0.75 per unit and a selling price of $1.25 per unit. Under the current system, fixed costs are $12,000 and current volume is 50,000 units. The Grocery can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of $5,000. Variable cost would increase to $1.00, but their volume should increase to 70,000 units due to the higher quality product.

1. Should the company buy the new equipment? Explain and support your answer by showing all calculations.
2. What are the break-even points in dollars and units for the two processes presented above?
3. What volume of output will yield a profit of $35,000 under each scenario?

THANK YOU VERY MUCH!