Item25 Item 25Item 25 Mullis Corp. manufactures DVDs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mullis can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mullis' break-even point in units?

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heavenandholiness heavenandholiness · Answer 1 · 2020-03-30T07:38:36+02:00

Answer:

NO EFFECT

Explanation:

Item 25 Mullis Corp. manufactures DVDs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit.

Break Even Points units = Fixed Costs / Contribution per unit = 28,000 / ($5-$3.6) = 20,000 units

Mullis can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit.

Break Even Points units = Fixed Costs / Contribution per unit = 36,000 / ($5-$3.2) = 20,000 units

The purchase of the new machine will have NO EFFECT on Mullis' break-even point in units.