Answer:
1. The Victoria option is advantageous if the units exceed 5,129
2. Conversely, if the units fall below 5,129, the Perth option is preferable
Explanation:
Here, we need to determine the break-even point by finding the difference between the fixed costs and the variable costs, as detailed below:
Break-even points = Change in fixed cost ÷ change in variable cost per unit
where,
Change in fixed cost = $1,000,000 - $800,000 = $200,000
Change in variable cost per unit = $112 - $73 = $39
Now substitute these numbers into the formula:
Thus, the calculation will result in
= $200,000 ÷ $39 per unit
= 5,129 units
The Victoria option is preferable when the units exceed 5,129
And, if the units are fewer than 5,129, then the Perth option is better
