Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units. Operating income is presented below:

	Volume	Per unit	Total	%
Revenue	12,000	$30.00	$360,000	100
Variable Expense	12,000	21.00	252,000	70
Contribution Margin	12,000	$ 9.00	$108,000	30
Fixed Expenses			90,000
Operating Income			$ 18,000

1. Calculate the current break-even point in units sold and total revenues.
2. Management is considering the use of automated production equipment. If this were done, variable costs would drop to $15.00 per unit, but fixed expenses would increase to $100,000 per month.
   1. Calculate operating income at a volume of 12,000 units per month with the new cost structure.
   2. Calculate the break-even point in units with the new cost structure.
3. Do you believe management of Preppy Co. should purchase the new equipment? Explain your answer.