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Given: OLD TECHNOLOGY: 3800 units at $800 Variable cost $480 per unit=480x3800=1,824,000 Annual fixed cost 1,120,000 Revenue 3,040,000 Net Opportunity Income NOI 96,000 Total cost

Given:

OLD TECHNOLOGY:

3800 units at $800

Variable cost $480 per unit=480x3800=1,824,000

Annual fixed cost 1,120,000

Revenue 3,040,000

Net Opportunity Income NOI 96,000

Total cost 2,944,000

Break-even point 3500 units=fixed cost/(sale price per unit-variable cost x unit)=1120000/320=3500

DOL= (sales-variable costs)/(sales-variable cost-fixed costs)

(3040000-1824000)/( 3040000-1824000-1120000)=1.216.00/96000=12.67

NEW TECHNOLOGY

5000 units at $800

Variable costs $240 x units=$240x5000=1,200,000

Annual Fixed costs $2240,000

Revenue 4,000,000

Net Opportunity Income (NOI) $560.000

Total cost 3,440,000

DOL= (sales-variable costs)/(sales-variable cost-fixed costs)

4000000-1200000/(4000000-1200000-2240000)=2800000/560000=5

Break-even point 224000000/800-240=4000

  1. Create a graph illustrating the company's total revenue curve and the two total cost curves (old technology and new technology). Identify the two breakeven sales levels on the graph.
  2. Calculate the sales volume at which NOI for the company is the same under both production methods and show that sales level on the graph.

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