Question

The Jazzy Java Company is considering upgrading its espresso machine to reduce the time to make each cup of coffee. The current machine has fixed costs of $1,300.00 per year and variable costs of $0.70 per cup of coffee. With the new machine, fixed costs increase to $7,000.00 per year and variable costs are $0.40 per cup of coffee. The coffee cups are sold at an average price of $4.50.

1. Using Excel, develop a PROFIT graph for the two options showing the indifference point you computed in part A. Label the graph completely

Answer 1

Asnwer to the Given question is herein below, Assumption os equal quantity sold in both options has been made to get an accurate comparision of the same.

Here we can also derive the ratio for every 10000 cups sold from old machine, 12195 cups shall be sold from new machine to derive same amount of profit.