Question
Each of the three companies will be producing a new product line in the coming years and has the choice of producing the products in
Each of the three companies will be producing a new product line in the coming years and has the choice of producing the products in a large factory with a small number of workers or a small factory with a large number of workers. Each product will be sold for $10.
Crossover level of unit sales: Andy Cleaning Solutions will be producing a new line of mops. If the large factory is chosen, the cost per unit to produce each mop will be $2.84, while the cost per unit will be $6.67 for the small factory. The large factory would have fixed cash costs of $2.5 million and a depreciation expense of $300 000 per year, while those expenses would be $460 000 and $100 000 in the small factory. Calculate the number of mops for Andy Cleaning Solutions for which the accounting operating profit is the same, regardless of the factory choice.
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