Dillon, Jones, and Kline, Ltd. is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.

Model A:

Variable costs, $20.00 per unit

Annual fixed costs, $985,700

Model B:

Variable costs, $12.80 per unit

Annual fixed costs, $1,114,100

The selling price is $67 per unit for the universal gismo, which is subject to a 15 percent sales commission. (In the following requirements, ignore income taxes.)

1. How many units must the company sell to break even if Model A is selected? (Do not round intermediate calculations and round final answer up to nearest whole number.)

2-a.Calculate the net income of the two systems if sales and production are expected to average 49,000 units per year.

Net IncomeModel A Model B

3. Assume Model B requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $410,000 and will be depreciated over a five-year life by the straight-line method. How many units must the company sell to earn $956,000 of income if Model B is selected? As in requirement (2), sales and production are expected to average 49,000 units per year. (Do not round intermediate calculations and round final answer up to nearest whole number.)