Shawn Pen & Pencil Sets Inc. has fixed costs of $421,400. Its product currently sells for $18 per unit and has variable costs of $8.20 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $440,000 and drive up fixed costs to $563,500. Although the price will remain at $18 per unit, the increased automation will reduce costs per unit to $5.75. a. Compute the following break-even points: i. Current break-even point ii. Proposed new break-even point b. As a result of Bic's suggestion, will the break-even point go up or down? N

Shawn Pen & Pencil Sets Inc. has fixed costs of $421,400. Its product currently sells for $18 per unit and has variable costs of $8.20 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $440,000 and drive up fixed costs to $563,500. Although the price will remain at $18 per unit, the increased automation will reduce costs per unit to $5.75. a. Compute the following break-even points: i. Current break-even point ii. Proposed new break-even point b. As a result of Bic's suggestion, will the break-even point go up or down? N

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter7: Economies Of Scale And Scope

Section: Chapter Questions

Problem 8MC

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