Question

For a table manufacturing company, selling price for a table is $189.00 per Unit, Variable cost is $29.00 per Unit, rent is $4,266.00 per month and insurance is $248.00 per month. Company wants to expand its business and improve the table quality, it wants to increase the selling price for a table to $293.00 per Unit, Variable cost to $47.00 per Unit, bigger area will have rent $6,508.00 per month and insurance is $381.00 per month At what point will the company be indifferent between the current mode of operation and the new option?

Answer 1

Indifferent point is where the number of units at which profit/(loss) of both options are equal.
Let the number of units be "x"
Therefore,
(189x-29x)-(4266+248)=(293x-47x)-(6508+381)
160x-4514= 246x-6889
86x=2375
x = 27.62
Therefore,
if the number of units are below 27 units, current mode of operation is better and if the
number of units are 28 units or above new option is better.