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, $16.00 per unit
Annual fixed costs, $985,600
Model no. 4399:
Variable costs, $12.80 per unit
Annual fixed costs, $1,113,600

Corrigan’s selling price is $64 per unit for the universal gismo, which is subject to a 5 percent sales commission. (In the following requirements, ignore income taxes.)
Required:
1. How many units must the company sell to break even if Model 6754 is selected?
2. Which of the two systems would be more profitable if sales and production are expected to average 46,000 units per year?
3. Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $450,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn $956,400 of income if Model 4399 is selected? As in requirement (2), sales and production are expected to average 46,000 units per year.
4. Ignoring the information presented in requirement (3), at what volume level will management be indifferent between the acquisition of Model no. 6754 and Model no. 4399? In other words, at what volume level will the annual total cost of each system be equal?