Answer:
The Draper Corporation would be indifferent between continuing and discontinuing of Doombugs at 20,000 units.
Explanation:
The draper should be indifferent at the level at which they covered all of their Fixed Cost.
The sales price per unit is ⇒ 150,000/15,000 = 10 per unit
The Variable cost per unit is ⇒ 120,000/15,000 = 8 per unit
The Break-even units for Draper should be:
Break-even units = <u> Fixed Cost </u>
Sale price - Variable Cost
Break-even units = <u>40,000</u>
10-8
Break-even units = <u>40,000</u>
2
Break-even units = 20,000 units
