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XYZ Company has the option to sell a new product. It will require assembly before it can be sold. They have the

option to purchase additional equipment to automate the assembly process for a fixed amount or hire their own staff to do this manually. They anticipate that they will have about $200,000 of variable cost and $200,000 of fixed costs regardless of which option they pick and they anticipate that the machine will cost $400,000 and it will be the same cost to hire their own staff. a. At what level of sales is the point of indifference? b. Which option will be better above or below the point of indifference?

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