Break-even point, what-if analysis Premier Products, Inc. is considering re¬ placing its existing machine with a new faster machine that will produce a more reliable product and will turn around customer orders in a shorter period. This change is expected to increase the sales price and capacity-related costs but not the flexible costs.

REQUIRED

(a) Determine the break-even point in units for the two machines.

(b) Determine the sales level in units at which the use of the new machine will achieve a 10% target profit-to-sales ratio.

(c) Determine the sales level in units at which profits will be the same for ei¬ ther the old or the new machine.

(d) Which machine represents a lower risk of incurring a loss? Explain why.

(e) Determine the sales level in units at which the profit-to-sales ratio will be equal with either machine.(LO 8)

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Cost Item Monthly capacity-related costs Flexible cost per unit Sales price per unit Old Machine New Machine $120,000 14 $250,000 14 18 20