Assume Paper Mate is planning to introduce a new executive pen that can be manufactured using either a capital-intensive method or a labor-intensive method. The predicted manufacturing costs for each method are as follows:

Paper Mate's market research department has recommended an introductory unit sales price of $30. The incremental selling costs are predicted to be $500,000 per year, plus $2 per unit sold. (a) Determine the annual break-even point in units if Paper Mate uses the:

1. Capital-intensive manufacturing method. (units)

2. Labor-intensive manufacturing method.

(b) Determine the annual unit volume at which Paper Mate is indifferent between the two manufacturing methods. (units)

2. Compute operating leverage for each alternative at a volume of 220,000 units. Round your answers two decimal places.

Capital-Intensive operating leverage

Labor-Intensive operating leverage