Final answer:
To find the break-even point in dollars, the firm needs the total fixed costs and the variable cost per unit for each production method. Changes in labor and machine costs significantly affect these calculations, though specific values are required to determine an exact break-even point.
Step-by-step explanation:
To determine the break-even point in dollars for Flanders' purchase of new machinery, we need to analyze the information provided. The firm has a choice between different production methods, which involve varying combinations of labor and machinery costs. Since we do not have the specifics of Flanders' cost structures for each method, we can consider the general formula for break-even point: Total Fixed Costs divided by (Selling Price per Unit minus Variable Cost per Unit). When labor and machine costs change, these will impact the variable cost per unit, and the change in the total fixed costs (like the cost of purchasing new machinery) will affect the break-even point.
Suppose the cost of labor remains at $40 per hour and machinery cost varies. If the cost decreases to $50 per machine, the firm calculates the total cost for each production method to find the lowest. If instead, the cost increases to $55 and the labor stays at $40, the firm recalculates the total cost of each method to determine the most cost-effective one to choose.
The information given does not provide enough detail to calculate a specific break-even point in dollars, but it outlines that the break-even analysis depends on the total cost (fixed plus variable) and how efficiency gains with new machinery can influence the number of units needed to be sold to cover the costs.