International Data Systems' information on revenue and costs is relevant only up to a sales volume of $106,000$ units. After $106,000$ units, the market becomes saturated and the price per unit falls from $$16\mathrm{.}00$ to $$9\mathrm{.}80.$ Also, there are cost overruns at a production volume of over $106,000$ units, and variable cost per unit goes up from $$8\mathrm{.}00$ to $$8\mathrm{.}50.$ Fixed costs remain the same at $$56,000.$

a$.$ Compute operating income at $106,000$ units.

Operating income

b$.$ Compute operating income at $206,000$ units.

Operating income

Sterling Optical and Royal Optical both make glass frames and each is able to generate earnings before interest and taxes of $$180,000.$ The separate capital structures for Sterling and Royal are shown here:

$\backslash$table$[[,$Royal$],[$Debt @ $12\%,$$$900,000,$Debt @$12\%,$$$300,000$