Draw two break-even graphs-one for a conservative firm using labor-intensive production and another for a capital-intensive firm. Assuming these companies compete within the same industry and have identical sales. explain the impact of changes in sales volume on both firms' profits. Based on the following assumtions draw two break-even graphs. Labor Intensive Capital Intensive Selling price $12.00 $12.00 Variable cost per unit $8.00 $5.00 Fixed costs $200.000 $300.000 Solution Problem 5-4 Instructions Select the appropriate range required to draw the graph. Complete the tables below for Down the Labensive and capital-mensive s Labor-mensive Company Units Total Revenue Variable costs Contribution margin Fixed Costs Total Costs 25.0000 50.0000 75.000 100.000 $300.000 $125,000 $175.000 $200.000 $300,000 $200.000 $425.000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 Labor-Intensive Company Revenus and costs Capital-Intensive Company Total Revenue Variable costs Contribution margin Fixed Costs Total Costs 0 25,000 50,000 75,000 100,000 Units produced and sold Total Revenue -Fixed costs Total costs 25.000 $300.000 50.000 75.000 100.000 $125.000 $175.000 $300,000 $300.000 $300.000 $425.000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 Capital-Intensive Company Revenus and costs 0 25,000 50,000 75,000 100,000 Units produced and sold -Total Revenue --Fixed costs Total costs Explain the impact of changes in sales volume on both firms' profits. The company having the high fixed costs will have lower variable costs than its competitor since it has substituted capital for labor. With a lower variable cost. the high fixed cost company will have a larger contribution margin. Therefore, when sales rise. its profits will increase faster than the low fixed cost firm and when the sales decline. the reverse will be true.