California Gardens, Inc., prewashes, shreds, and dis-tributes a variety of salad mixes in 2-pound bags. Doug Voss, Operations VP, is considering a new Hi-Speed shredder to replacethe old machine, referred to in the shop as “Clunker.” Hi-Speedwill have a fixed cost of $85,000 per month and a variable costof $1.25 per bag. Clunker has a fixed cost of only $44,000 permonth, but a variable cost of $1.75. Selling price is $2.50 per bag.a) What is the crossover point in units (point of indifference) forEric Limon/ Shutterstock the processes? b) What is the monthly profit or loss if the company changes tothe Hi-Speed shredder and sells 60,000 bags per month?c ) What is the monthly profit or loss if the company stays withClunker and sells 60,000 bags per month?

California Gardens, Inc., prewashes, shreds, and dis-
tributes a variety of salad mixes in 2-pound bags. Doug Voss,

Operations VP, is considering a new Hi-Speed shredder to replace
the old machine, referred to in the shop as “Clunker.” Hi-Speed
will have a fixed cost of $85,000 per month and a variable cost
of $1.25 per bag. Clunker has a fixed cost of only $44,000 per
month, but a variable cost of $1.75. Selling price is $2.50 per bag.
a) What is the crossover point in units (point of indifference) for
Eric Limon/ Shutterstock

the processes?

b) What is the monthly profit or loss if the company changes to
the Hi-Speed shredder and sells 60,000 bags per month?
c ) What is the monthly profit or loss if the company stays with
Clunker and sells 60,000 bags per month?