Due to sudden interest in its product, a local widget company is considering an expansion of its facilities. The company believes that it can sell widgets for \($0.18\) each.
The tax rate for the company is 30 percent. The company has the following two opportunities:
1. Build Factory A with annual fixed costs of \($20\) million and variable costs of \($0.10\) per widget. This factory has an annual capacity of 500 million widgets.
2. Build Factory B with annual fixed costs of \($10\) million and variable costs of \($0.12/widget.\) This factory has an annual capacity of 300 million widgets.

a. What is the break-even point in widgets for Factory A?

b. If the company wants to generate an after-tax profit of \($2\) million with Factory B, how many widgets would the company have to process and sell?

c. If demand for widgets is uncertain, which factory is riskier?

d. At what level of widgets would the after-tax profit of the two factories be the same?