1. Metal Man Enterprises is considering undertaking a massive upgrade of their production & manufacturing equipment. The modification will allow for increased quality & improved efficiencies around the manufacturing process (less waste & repairs). The increased quality will allow for a higher selling price and greater product margin. The cost to undertake this upgrade is $412,500 on top of the current fixed costs of $285,000.

Cost information is as follows:

	Current Equipment	Upgraded Equipment
Selling price per unit	$15	$25
Variable cost per unit	$12	$10

a) What is Iron Man Enterprises breakeven point in units with the current equipment & upgraded equipment (1 mark)

b) Determine the sales level at which the modified equipment earns a 20% target profit sales ratio (ignore income taxes) (3 marks)

c) Determine the sales level at which profits will be the same under both the current and upgraded equipment (3 marks)