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Mop and Broom Manufacturing has decided to produce a new type of mop. The mop can be made with the current equipment in place. Estimates of fixed costs per year are $39,000, and the variable cost for each mop produced is $20.
However, the company is considering the purchase of new equipment that would produce the mop more efficiently.
The fixed cost would be raised to $49,000 per year, but the variable cost would be reduced to $17 per unit. The company still plans to sell the mops at $23 per unit. Should Mop and Broom produce the mop with the new or current equipment?
Specify the volume of demand for which you would choose each process. (Calculate the following demand ranges. If a range goes to infinity enter "infinity". All boxes must be filled.)
Old equipment
New equipment
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