Problem: Letterman Office Service & Supply (LOSS) sells a variets of office equipment including the Executive office chair. The Executive sells for $250. Expected sales for next year are 6,000 units (sales estimates made by managemet are usually withing 10%) LOSS is considering a change in its manufacturing process. The accountants and engingeers have developed the followng two cost structures:

Current Manufacturing System: $175 variable cost per unit and $360,000 in fixed costs.

Alternate Manufacturing System: $75 variable cost per unit and $945,000 in fixed costs.

At what leve of sales will LOSS be indifferent between thetwo manufacturing plans?

Indifference Point in units:____________

What are the break-even points IN UNITS for the two maucaturing plans?

Current system breal-even:_________ Alternate system break-even:__________

What are the margins of safety of the two plans in units and precentages?

Current system MOS in units:___________ Alternate system MOS in units:___________

Current system MOS% :___________ Alternate system MOS%:___________

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