a. Breakeven Point = Fixed cost / ( Sales per unit – variable cost per unit)
So, For the given case, Breakeven point for Philips fireworks= 12000/(25-8) = 706 Units
b. Breakeven point for the new case = 20000/(25-5) = 1000 Units
c. For Philip to be indifferent, the total cost for the product must be same in both the capacity alternatives.
Let at volume Q, the total cost is equal for both the cases.
Then we have,
12000+ (8*Q) = 20000+(5*Q) => 3Q = 8000 => Q = 2666.66 ~ 2667 Units.
So, at 2667 units Philip will be indifferent to the two capacity alternatives.