Shawn Pen & Pencil Sets Inc. has fixed costs of $235,000. Its product currently sells for $10 per unit and has variable costs of $5.00 per unit. Mr. Bic, the head of manufacturing, proposes to buy new equipment that will cost $360,000 and drive up fixed costs to $337,500. Although the price will remain at $10 per unit, the increased automation will reduce costs per unit to $3.75.

a. Compute the following break-even points.

Current break-even point:

Proposed new break-even point:

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