Problem

1. The electronics firm in Problem 20 is now considering purchasing the new equipment and increasing the selling price of its product to $1.20 per unit. Even with the price increase, the new volume is expected to be 50,000 units. Under these circumstances, should the company purchase the new equipment and increase the selling price?

2. A distributer of prewashed shredded lettuce is opening a new plant and considering whether to use a mechanized process or a manual process to prepare the product. The manual process will have a fixed cost of $43,400 per month and a variable cost of $1.80 per 5-pound bag. The mechanized process would have a fixed cost of $84,600 per month and a variable cost of $1.30 per bag. The company expects to sell each bag of shredded lettuce for $2.50. (a) Find the break-even point for each process. (b) What is the monthly profit or loss if the company chooses the manual process and sells 70,000 bags per month?