Holdings Corp has fixed costs of $500,200. Its product currently sells for $22 per unit and has variable costs of $9.80 per unit. Mr. Careful, the head of manufacturing, proposes to buy new equipment that will cost $480,000 and drive up fixed costs to $640,500. Although the price will remain at $22 per unit, the increased automation will reduce costs per unit to $6.75.

a.Compute the following break-even points. (Do not round intermediate calculations. Round your answers to the nearest whole number.)

Current break-even pointunits Proposed new break-even pointunits

b.As a result of Bics suggestion, will the break-even point go up or down?

multiple choice

The break-even point will go down.

The break-even point will go up.