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Compare the breakeven points for the two different options

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Problem 1: Suppose the price of your product is $10.00. The variable cost per unit is currently $5.00, and the fixed costs are $15,000 per month. Suppose the company can invest in some equipment that will reduce the variable cost per unit to $3.00. However, the cost of financing the new equipment will increase the fixed costs to $17,500 per month. Compare the breakeven points for these two different options. Assuming the company believes it can sell 2,800 units of its product at $10.00 price, which is the better choice and why?

Reference no: EM132679494

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