A parts manufacturer plans to replace its existing facility witha new one. The management is considering two possible capacitiesfor the new facility: 200,000 or 250,000 units per year. The200,000 unit plant would have an annual fixed cost of $4.0 millionand a per unit production cost of $20. The 250,000 unit plant wouldhave an annual fixed cost of $6 million and a per unit cost of $15.The parts will be sold for an average price of $60 per unit.
Calculate the break-even point for each capacity alternative
Suppose the company projects its sales to be 220,000 units peryear. Which alternative would you recommend?
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