Machines have taken on an important role in production. The cost of machines is typically wrapped up in the fixed cost of production. A trade-off, perhaps, is that the larger and more complex the machine the larger the fixed cost, but the lower the unit variable cost. Say a company is considering a new facility with varying degrees of machine sophistication. The product it makes sells at a price of $5 per unit. The cost structure for 3 different machines would be

Option f v

1 100,000 2

2 60,000 3

3 25,000 4

a-what is the breakeven level of output for each option?

b-what level of output for each option would yield a profit of $50,000?

c-what level of output for each option would yield a profit of $100,000?

d-if you felt pretty good that the breakeven level of output could be sold under any option, which option would you choose? Explain your choice.