Calculate the number of firecracker bundles for red cat

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Reference no: EM13620474

Red Cat Firecrackers is considering whether to build a large or small factory to produce its firecrackers. Regardless of the production method, each bundle of firecrackers sells for $4.00. If the large factory is chosen, then the variable cost per bundle of firecrackers will be $0.50, while the fixed costs will be $300,000 and the annual depreciation and amortization amount will be $100,000. If the small factory is chosen, then the variable cost per bundle of firecrackers will be $1.75 while the fixed costs will be $100,000 and the annual depreciation and amortization amount will be $10,000.

Calculate the number of firecracker bundles for Red Cat such that the accounting operating profit is the same, regardless of the factory choice, that is, calculate the crossover level.

Reference no: EM13620474

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