Determine profit function of each of the three alternatives

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Reference no: EM132214389

A manufacturer is evaluation options regarding production equipment. He has three options:

a. Refurbish the old equipment for a cost of $70,00

b. Make major modification for the existing equipment for a cost of $135,000

c. Purchase a new one for $230,000

The Product sells for $10. However, the variable cost will differ depending on the decison made. If he referbishes, the variable cost will be $7.20. If he makes major modifications, the variable cost per unit is $5.25. Finally, the variable cost per unit for the new equipment is $4.75.

1. a) What is the break even point for purchasing the new equipment.

b) Determine the profit function of each of the three alternatives.

Reference no: EM132214389

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