Question

Beta Ltd has a product that sells for $50 and is produced at a variable production cost of $24 per unit and a variable non-production cost of $8. The variable production costs can be reduced 25% by installing a new piece of equipment. The Installation of the new equipment will increase fixed costs from the present level of $122,400 to $159,000. Calculate the present break-even point and the new break-even point ifthe equipment is installed

Answer 1

$$50Q=(24+8)Q+122,400$$

$$Q=6,800$$

The new break-even point ifthe equipment is installed

$$50Q=(18+8)Q+159,000$$

$$Q=6,625$$