Oriole’s Candles will be producing a new line of dripless candles in the coming years and has the choice of producing the candles in a large factory with a small number of workers or a small factory with a large number of workers. Each candle will be sold for $10. If the large factory is chosen, the cost per unit to produce each candle will be $3.00. The cost per unit will be $7.80 in the small factory. The large factory would have fixed cash costs of $2.5 million and a depreciation expense of $300,000 per year, while those expenses would be $560,000 and $100,000, respectively in the small factory.

Calculate the accounting operating profit break-even point for both factory choices for Oriole’s Candles.

1. large factory break even? 

2. small factory break even? 

Answer rating: 100% (QA)

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