The Jazzy Java Company is considering upgrading its espresso machine to reduce the time to make each cup of coffee. The current machine has fixed costs of $1,300.00 per year and variable costs of $0.70 per cup of coffee. With the new machine, fixed costs increase to $7,000.00 per year and variable costs are $0.40 per cup of coffee. The coffee cups are sold at an average price of $4.50.

(a) If the forecast is for 15,000 cups of coffee to be sold each year which process should be used? Why? Show proof/work.

(b) At what volume of sales (Q) will the two processes have the same total cost?

(c) Using Excel, develop a PROFIT graph for the two options showing the indifference point you computed in part A. Label the graph completely (i.e. the graph should speak for itself). Paste an image (picture) of the graph below.