1. Eaton Tool Company has fixed costs of $525,000, sells its units for $106, and has variable costs of $56 per unit.

a. Compute the break-even point.

Break-even point _________units b. Ms. Eaton comes up with a new plan to cut fixed costs to $400,000. However, more labor will now be required, which will increase variable costs per unit to $59. The sales price will remain at $106. What is the new break-even point? (Round your answer to the nearest whole number.)

New break-even point _______units

2. International Data Systems' information on revenue and costs is relevant only up to a sales volume of 115,000 units. After 115,000 units, the market becomes saturated and the price per unit falls from $16.00 to $9.80. Also, there are cost overruns at a production volume of over 115,000 units, and variable cost per unit goes up from $8.00 to $8.25. Fixed costs remain the same at $65,000.

a. Compute operating income at 115,000 units.

Operating Income _________

b. Compute operating income at 215,000 units.

Operating Income __________