Shawn Pen & Pencil Sets Inc. has fixed costs of $127,400. Its product currently sells for $6 per unit and has variable costs of $3.40 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $320,000 and drive up fixed costs to $188,500. Although the price will remain at $6 per unit, the increased automation will reduce costs per unit to $2.75.

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

Current break-even point	units
Proposed new break-even point	units

b.

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

	The break-even point will go up.
	The break-even point will go down.