How many units must the company sell to earn

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Question - A company is deciding which of two new thermostat systems to produce and sell. The Basic system has variable costs of $8.00 per unit, excluding sales commissions, and annual fixed costs of $520,000; the Deluxe system has variable costs of $6.40, excluding sales commissions, and fixed costs of $672,000. The company's selling price is $32 per unit for the Basic model and $38 for the Deluxe model. The company pays a 10 percent sales commission.

How many units must the company sell to earn $40,000 of income, after considering depreciation, if the Basic system is selected?

Explain to management the level of volume at which it should be indifferent between the Basic system and the Deluxe system.

Reference no: EM133068931

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