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Buba Inc. is considering replacing an existing machine with a new and faster machine that will produce a more reliable product that is better tolerances).
Buba Inc. is considering replacing an existing machine with a new and faster machine that will produce a more reliable product that is better tolerances). The switch to a new machine resulting in a superior product is expected to allow Buba to increase its sales price for the product. The switch will increase fixed costs, but not the variable costs The cost and revenue estimates are as follows: Cost Item Old Machine New Machine Monthly fixed costs $ 120,000 $ 250,000 Variable cost per unit 14 14 Sales price per unit 18 20 Required h a. Determine the break-even point in units for the two machines b. Determine the sales level in units at which the new machine will achieve a 10% target profit-to sales ratio (ignore taxes) c. Determine the sales level at which profits will be the same for either the old or new machine
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