1. Alpha Company is considering the development of one of the following potential products: Product No. PX45 or Product No. NX10. Manufacturing cost information follows.

	No. PX45	No. NX10
Annual fixed costs	$440,000	$660,000
Variable manufacturing cost per unit	$44	$34

Regardless of which product is introduced, the anticipated selling price will be $100 and Alpha will pay a 6% sales commission on gross dollar sales. Sales commissions are the only period cost. Alpha will not carry an inventory of these items. Required:

1. What is the break-even sales volume (in units) on product No. PX45?

1. (i) Alpha expects to sell 20,000 units of either product PX45 or product NX10. At this level of sales what is the operating leverage for each product?

(ii) Alpha wants to determine where to focus its advertising. Using the operating leverage you calculated in part (i), and expecting a 20% increase in sales, by how much will operating profits increase for the PX45 and the NX10.

What is the point of indifference; i.e. at what unit-volume level of sales will the profit/loss on product No. PX45 equal the profit/loss on product No. NX10?