Q1A. (10 Marks) Break Even Analysis Canada Goose is planning to expand their business by introducing a new product called Fashion Nail polish gloves. Due to the ongoing labour shortages, Canada goose wants to produee gloves through fully automatic machines. Canada goose has received a quote from two suppliers loeated at China and Germany. Machine 1 can be bought from China at the price of $20,000. Machine 2 can be bought from Germany at the price of $50,000. Both machines require maintenance after producing a prespecified number of products. Canada Goose's accounting department specifies the maintenance cost as a variable cost per unit to produce a product because the machine requires maintenance after a prespecified number of production. According to the accounting department, Machine 1, will require $40 per unit of variable cost, while Machine 2, will require $30 per unit of variable cost. Can you help the Canada Goose manager to perform the following analysis? A) What is the break-even quantity between two machines? B) Which alternative should be selected if the annual requirements are 5,000 gloves? C) How much will the Company save per year by selecting the option chosen in part B (fo annual requirements of 5,000 gloves)? Solution