Extensions of the Basic Model-Semifixed (Step) Costs: Shift Manufacturing Company manufactures and sells one product. The sales price of $10 remains constant per unit regardless of volume, as does the variable cost of $6 per unit. The company can choose to operate at one of the following three levels of monthly operations:

Required:

a. Calculate the break-even point(s).

b. If the company can sell everything it makes, should it operate at level 1, level 2, or level 3? Support your answer.

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Volume Range Total (Production and Fixed Sales) Costs Level 1 0-16,000 $40,000 Level 2 16,001-28,000 72,000 Level 3 28,001-38,000 94,000