Hess Co Manufactures a Product That Sells for $12 Per Unit

question 178

Essay

Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit. What effect would the purchase of the new machine have on Hess's break-even point in units?

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Definitions:

Saks Fifth Avenue

A high-end American department store chain known for offering luxury goods and designer apparel.

Bloomingdale's

An American luxury department store chain founded in New York City, known for selling designer brands and high-end merchandise.

Community Shopping Center

A retail location that typically has one primary store (usually a department store branch) and often 20 to 40 smaller outlets, serving a population of consumers who are within a 10- to 20-minute drive.

Primary Store

The main retail outlet or location of a business that serves as the centerpiece for brand identity and customer engagement.