Dillon, Jones, and Kline, Ltd. 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 A:
Variable costs, $18.00 per unit
Annual fixed costs, $985,800
Model B:
Variable costs, $11.80 per unit
Annual fixed costs, $1,113,900
The selling price is $60 per unit for the universal gismo, which is subject to a 15 percent sales commission.
(In the following requirements, ignore income taxes.)
Required information
Required:
1. How many units must the company sell to break even if Model A is selected? (Do not round intermediate calculations and round final answer up to nearest whole number.)
2-a. Calculate the net income of the two systems if sales and production are expected to average 45,000 units per year.
2-b. Which of the two systems would be more profitable? Model A Model B 4. Ignoring the information presented in part (3), at what volume level will the annual total cost of each system be equal? (Do not round intermediate calculations and round your final answer up to nearest whole number.)