Question: If the Jay Linoleum Company has fixed costs of $70,000, and its product currently sells for $4 per unit with the variable costs per unit at $2.60. Mr. Thomas, the head of Manufacturing, proposes to buy new equipment that will cost $300,000 and drive up fixed costs to $105,000. With the price remaining at $4 per unit, the increased automation reduces variable costs per unit to $2.25.
Question: Will the break-even point go up or down?
Compute the necessary numbers.