Break-Even Point Analysis

1. Briefly Explain Break-Even Point (BEP) Analysis. Explain the concepts of fixed and variable costs and gave one example for each type of cost.
2. The new plasma cutting machine that Tyco, Inc. is considering investing inhas the following value driver estimates of fixed and variable costs:

	Expected or Base-Case
Current Unit sales	34,000
Price per unit	$50
Variable cost per unit	($30)
Cash fixed cost per year	$(400,000)
Depreciation expense	$(250,000)

What is the Break-Even level of units? If management expects to generate a total of $100,000 profit next year, how many more units should the company sell than today's to achieve such goal? Please show your calculations.What do we learn from this exercise? In other words, why does BEP matter?