An important part of processing is performed by a machine that is currently being leased for $20,000 per month. Belli-Pitt has been offered an arrangement whereby it would pay $0.10 royalty per kilogram processed by the machine rather than the monthly lease.
1.	Based on the current sales level should the company choose the lease or the royalty plan? Explain
2.	At what level of sales dollars would the company be indifferent between choosing the lease or royalty plan and resulting cost structure?Explain

Belli-Pitt, Inc produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows:
	Sales	$540,000
	Less: Variable Expenses	360,000
	Contribution Margin	$180,000
	Less: Fixed Expenses	120,000
	Operating Income	60,000
	The company produced and sold 120,000 kilograms of product during the month. There were no beginning or ending inventories.