8 pts Question 25 I heard of a company, call them Y Co., that changed from purchasing production equipment that had a one year life to allowing the vendor to install the equipment and Y Co. paid a per-hour fee to the vendor for each hour the equipment was used. Y Co., never quite knows how much sales demand, and therefore how much production volume they will face each month or each year. However, at recent sales levels the expected value of the rental is about equal to the purchase price of the equipment. Think about this as a cost-volume-profit problem. Required: 1. What is the effect on the intercept and slope of the total cost line of making this change? For full credit, state whether fixed costs increase or decrease. State whether variable cost per unit increases or decreases. 2. What is the effect on the operating leverage? For full credit, state the definition of operating leverage (a bit differently from the text), and then describe the effect of the change from purchasing the equipment to renting by the hour. 3. How does the change affect the riskiness of Y Co.? 8 pts Question 25 I heard of a company, call them Y Co., that changed from purchasing production equipment that had a one year life to allowing the vendor to install the equipment and Y Co. paid a per-hour fee to the vendor for each hour the equipment was used. Y Co., never quite knows how much sales demand, and therefore how much production volume they will face each month or each year. However, at recent sales levels the expected value of the rental is about equal to the purchase price of the equipment. Think about this as a cost-volume-profit problem. Required: 1. What is the effect on the intercept and slope of the total cost line of making this change? For full credit, state whether fixed costs increase or decrease. State whether variable cost per unit increases or decreases. 2. What is the effect on the operating leverage? For full credit, state the definition of operating leverage (a bit differently from the text), and then describe the effect of the change from purchasing the equipment to renting by the hour. 3. How does the change affect the riskiness of Y Co