Forever Pure produces two types of water filters. One attaches to the faucet and cleans all water that passes through the faucet. The other is a pitcher-cum-filter that only purifies water meant for drinking.
The unit that attaches to the faucet is sold for $72 and has variable costs of $20.
The pitcher-cum-filter sells for $88 and has variable costs of $16.
Forever Pure sells two faucet models for every three pitchers sold. Fixed costs equal $960,000.
Forever Pure is considering buying new production equipment. The new equipment will increase fixed cost by $166,400 per year and will decrease the variable cost of the faucet and the pitcher units by $4 and $8, respectively.
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