Problem #2: Bond Office Service & Supply (BOSS) sells a variety of office equipment including the Executive office chair. The Executive sells for $220. Expected sales for next year are 4,000 units (sales estimates made by management are usually within 10%). BOSS is considering a change in its manufacturing process. The accountants and engineers have developed the following two cost structures:

Current Manufacturing System: $160 variable cost per unit and $210,000 in fixed costs.

Alternate Manufacturing System: $80 variable cost per unit and $532,000 in fixed costs.

At what level of sales will BOSS be indifferent between the two manufacturing plans?

Indifference Point in units: _______________

What are the break-even points in Sales Dollars ($) for the two manufacturing plans?

Current System break-even $: ____________ Alternate System break-even $: ____________

What are the margins of safety (MOS) of the two plans in dollars ($) and percentage (%)?

Current System MOS $: Alternate System MOS $:

Current System MOS %: Alternate System MOS %:

Which plan would you choose for BOSS? Why? What if sales are expected to increase? What if sales are expected to decrease?