Question

Break-Even Analysis-additional euipment purchase

If the Jay Linoleum Company has fixed costs of $70,000, and its product
currently sells for $4 per unit with the variable costs per unit at
$2.60. Mr. Thomas, the head of

Manufacturing, proposes to buy new equipment that will cost $300,000 and
drive

up fixed costs to $105,000. With the price remaining at $4 per unit,
will the increased

automation reduce variable costs per unit to $2.25?

Question: Will the break-even point go up or down?

Compute the necessary numbers.

Solutions

Expert Solution
No answers


Submit Your Answer