Problem: Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.
Model no. 6754:
Variable costs, $20.00 per unit
Annual fixed costs, $986,300
Model no. 4399:
Variable costs, $11.80 per unit
Annual fixed costs, $1,114,500
Corrigan's selling price is $70 per unit for the universal gismo, which is subject to a 15 percent sales commission. (In the following requirements, ignore income taxes.)
How many units must the company sell to break even if Model 6754 is selected? (Do not round intermediate calculations and round your final answer to the nearest whole number.)
Q1. Calculate the net income of the two systems if sales and production are expected to average 44,000 units per year. (Omit the "$" sign in your response.)
Net Income
Model 6754 $
Model 4399 $
Q2. Which of the two systems would be more profitable?
Model 4399
Model 6754