Cottage Industries Ltd (see Example 11.2) expects to sell 500 baskets a month. The business has the opportunity to rent a basket-making machine. Doing so would increase the total fixed costs of operating the workshop for a month to $18,000. Using the machine would reduce the labour time to one hour per basket. The basket-makers would still be paid $27 an hour.

How much profit would the business make each month from selling baskets:

● assuming that the business does not rent the basket-making machine?

● assuming that it is rented?