$8$:$25$ AM Sun $26$ Nov

$7-36($ignore part $4)$

Problem $7-36$ CVP Relationships; Indifference Point $($LO $7-1,7-4)$

$2.$ Net income, model no$.4399$: $$1,094,400$

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\mathrm{.}00$ per unit

Annual fixed costs, $$985,600$

Model no$.4399$:

Variable costs, $$12\mathrm{.}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.$)$

Requlred:

How many units must the company sell to break even if Model $6754$ is selected?

Which of the two systems would be more profitable if sales and production are expected to average $46,000$ units per year?

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.

Ignoring the information presented in requirement $3,$ at what volume level will management be indifferent between the acquisition of Model $6754$ and Model $4399?$ In other words, at what volume level will the annual total cost of each system be equal? $($Hint: At any given sales volume, sales commissions will be the same amount regardless of which model is selected.$)$