Zeeco Lighting Company has fixed costs of $71,000, sells its units for $31 and has

variable costs of $16 per unit.

a) Compute the break-even point.

b) Ms. Watts comes up with a new plan to increase fixed costs by $42,000. This will

reduce the labour required, which will decrease variable costs per unit to $14.55

The sales price will remain at $31. What is the new break-even point?

c) Does the new plan have more or less leverage? What type of leverage is being

used in this question?

Break Even Analysis and Leverage (8 marks) Zeeco Lighting Company has fixed costs of $71,000, sells its units for $31 and has variable costs of $16 per unit. a) Compute the break-even point. b) Ms. Watts comes up with a new plan to increase fixed costs by $42,000. This will reduce the labour required, which will decrease variable costs per unit to $14.55. The sales price will remain at $31. What is the new break-even point? c) Does the new plan have more or less leverage? What type of leverage is being used in this