CVP analysis. A company is deciding which of two new thermostat systems to produce and sell. The Basic system has variable operating costs of $8.00 per unit and annual fixed costs of $520,000; the Deluxe system has variable costs of $6.40 and fixed costs of $672,000. The company's selling price is $32 per unit for both the Basic and Deluxe models, subject to a 10 percent sales commission.

a. Which of the two systems would be more profitable for the firm if sales are expected to a verage 150,000 units per year?

b. How many units must the company sell to break even if it selects the Deluxe system?

c. Suppose the Basic system requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $224,000 and will be depreciated over a 10-year life by the straight-line method. How many units must the company sell to earn $40,000 of income if the Basic system is selected'.'

d. Ignoring the information presented in part

c, at what volume level will management be indifferent between the Basic system and the Deluxe system'.'