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The local convenience store makes bread. Currently, their oven can produce 50 pieces of bread per hour. It has a fixed cost of $2,000, and a variable cost of $0.25 per bread. The owner is considering a bigger oven that can make 75 pieces of bread per hour. It has a fixed cost of $3,000, but a variable cost of $0.20 per piece of bread.
The price per bread is $5. The current break-even points in units is:
The current break-even point in dollars is:
The new break-even point in units will be:
The new break-even point in dollars will be:
If the owner expects to sell 9,000 pieces of bread and changes the oven, will profit change? If so, by how much?
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