Problem:
Red Cat Firecrackers is considering whether to build a large or small factory to produce its firecrackers. Regardless of the production method, each bundle of firecrackers sells for $4.00. If the large factory is chosen, then the variable cost per bundle of firecrackers will be $0.50, while the fixed costs will be $300,000 and the annual depreciation and amortization amount will be $100,000. If the small factory is chosen, then the variable cost per bundle of firecrackers will be $1.75 while the fixed costs will be $100,000 and the annual depreciation and amortization amount will be $10,000.
Task:
Question: Calculate the number of firecracker bundles for Red Cat such that the accounting operating profit is the same, regardless of the factory choice, that is, calculate the crossover level.
Note: Please provide equation and explain comprehensively and give step by step solution.