E-5

International Data Systems' information on revenue and costs is relevant only up to a sales volume of 113,000 units. After 113,000 units, the market becomes saturated and the price per unit falls from $12.00 to $7.80. Also, there are cost overruns at a production volume of over 113,000 units, and variable cost per unit goes up from $6.00 to $6.25. Fixed costs remain the same at $63,000.

a.Compute operating income at 113,000 units.

b.Compute operating income at 213,000 units.