Question
Rubber City Cycles manufactures carbon fiber bicycle frames for professional racing and avid amateur cyclists. Rubber City has found a CNC (computer numerical control) machine
Rubber City Cycles manufactures carbon fiber bicycle frames for professional racing and avid amateur cyclists. Rubber City has found a CNC (computer numerical control) machine that will significantly reduce manufacturing waste while improving the quality of the frames. The new CNC machine will increase annual fixed costs by $13,750, but will decrease variable cost per unit by $150. Rubber City expects to sell 750 frames next year. Annual data for the current system are as follows: Average selling price per frame $1,250 Average variable manufacturing cost per frame $700 Average variable selling cost per frame $75 Total annual fixed costs $142,500 By what amount will the breakeven point in units increase (decrease) if Rubber City purchases the new CNC machine? A. (50) B. 50 C. 250 D. (250)
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