Rubber City Cycles manufactures carbon fiber bicycle frames for professional racing and avid amateur cyclists.Rubber City has found a CNC (computer numerical control)machine that will significantly reduce manufacturing waste while improving the quality of the frames.The new CNC machine will increase annual fixed costs by $13,750,but will decrease variable cost per unit by $150.Rubber City expects to sell 750 frames next year.
Annual data for the current system are as follows:

By what amount will the breakeven point in dollars increase (decrease)if Rubber City purchases the new CNC machine?

Question

Rubber City Cycles manufactures carbon fiber bicycle frames for professional racing and avid amateur cyclists.Rubber City has found a CNC (computer numerical control)machine that will significantly reduce manufacturing waste while improving the quality of the frames.The new CNC machine will increase annual fixed costs by $13,750,but will decrease variable cost per unit by $150.Rubber City expects to sell 750 frames next year.
Annual data for the current system are as follows:

By what amount will the breakeven point in dollars increase (decrease)if Rubber City purchases the new CNC machine?

Quizplus · Accepted Answer

A)
Old B/E = FC / CM = 142,500 / (1,250 - 700 - 75)= 300
New B/E = (142,500 + 13,750)/ (1,250 - 700 - 75 - 150)= 250
Difference = 300 - 250 = 50 × $1,250 = $62,500

Rubber City Cycles Manufactures Carbon Fiber Bicycle Frames for Professional