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Assume model 4399 requires the purchase of additional
Course:- Accounting Basics
Reference No.:- EM13601496

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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, \$985,900
• Model no. 4399:
• Variable costs, \$10.80 per unit
• Annual fixed costs, \$1,114,000

Corrigan's selling price is \$67 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? (Do not round intermediate calculations and round your final answer to the nearest whole number.)
Break-even points____units

2-a.Calculate the net income of the two systems if sales and production are expected to average 42,000 units per year. (Omit the "\$" sign in your response.)

• Net Income
• Model 6754_________ \$
• Model 4399_________ \$

2-b. Which of the two systems would be more profitable?

• Model 6754
• Model 4399

3.Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost \$430,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn \$969,000 of income if Model 4399 is selected? As in requirement (2), sales and production are expected to average 42,000 units per year. (Do not round intermediate calculations and round your final answer to the nearest whole number.)
Required sales____units

4.Ignoring the information presented in part (3), at what volume level will the annual total cost of each system be equal? (Round your answer to the nearest whole number.)

Volume leve_____units

Verified Expert

This assignment is based on the basic concepts of the economics. This task is from the topic of the managerial economics. In this provided assignment, the case study of two model named as 6744 and 4399 are provided. We have to compare the various parameters of these models. There are four sub-problems based on this case study, in which we have to compare the net income and evaluate that which one project is more profitable. Also, we have to evaluate the target sales.

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