Atternative Production Procedures and Operating Leverage Assume Paper Mate is planning to introduce a new executwe pen that can be manufactured using ecther s capitalintensive method of a tabor-intensive method. The predicted manufacturing costs for teach method are as foliows Paper Mates market research departhent has recommended an introductory unit sales price of 331 , The incremental seling costs are predicted to be 5500.000 pet year, plus 32 pe unit soid. (a) Determine the arnuar break-ven point in unts if Paper Mate ves the 1. Cabitalimenswe manufacturing method. c unds 2. Labor inemeve manutacturing method. (b) Determine the annual unit volume at which Paper Mate is indifferent between the two manufacturing methods. x units (c) Management wants to know more about the effect of each alternative on operating leverage. 1. Explain operating leverage and the relationship between operating leverage and the volatility of earnings. OThey are negatively correlated, with increases in operating leverage accompanied by decreases in the volatility of earnings. They have little or no correlation because they are unrelated. They are positively correlated, with increases in operating leverage accompanied by increases in the volatility of earnings. 2. Compute operating leverage for each alternative at a volume of 230,000 units. Round your answers two decimal places. Copital-Intensive operating leverage Labor-Intensive operating leverage