To calculate the difference in the expected EBIT (Earnings Before Interest and Taxes) between using Machine B and Machine A, we follow these steps:

Step 1: Calculate Total Revenue (TR) for both machines

$\text{Total Revenue (TR)} = \text{Price per mouse (P)} \times \text{Expected unit sales (Q)}$ $TR = 25 \times 90,000 = 2,250,000$

Step 2: Calculate Total Costs (TC) for both machines

$\text{Total Costs (TC)} = \text{Fixed Costs (F)} + (\text{Variable Cost per Unit (V)} \times \text{Expected unit sales (Q)})$

Machine A:

$TC_A = 100,000 + (17 \times 90,000) = 100,000 + 1,530,000 = 1,630,000$

Machine B:

$TC_B = 400,000 + (10 \times 90,000) = 400,000 + 900,000 = 1,300,000$

Step 3: Calculate EBIT for both machines

$\text{EBIT} = \text{Total Revenue (TR)} - \text{Total Costs (TC)}$

Machine A:

$EBIT_A = 2,250,000 - 1,630,000 = 620,000$

Machine B:

$EBIT_B = 2,250,000 - 1,300,000 = 950,000$

Step 4: Calculate the difference in EBIT (EBIT_B - EBIT_A)

$\text{Difference} = EBIT_B - EBIT_A = 950,000 - 620,000 = 330,000$

Final Answer:

The firm's expected EBIT will be $330,000 higher if it uses Machine B instead of Machine A.

Let me know if you'd like a detailed breakdown or have more questions! Here are some additional related questions:

1. What is the break-even point for each machine in terms of units sold?
2. How would changes in variable costs impact the EBIT for each machine?
3. If sales volume dropped to 70,000 units, how would the EBIT comparison change?
4. How do fixed and variable costs impact operating leverage between the two machines?
5. What is the margin of safety for each machine at the expected sales level?

Tip: Always analyze both fixed and variable costs when comparing production options, as they significantly influence profitability depending on sales volume.