Question $4(10$ points$)$

$($Part $1$ of $2)$

Eli Company's operating data for the most recent month at $45,000$ units in sales is given below:

Sales at $45,000$ units:

$$900,000$

Variable expenses:

$$630,000$

Fixed expenses:

$$180,000$

The company has a large amount of unused capacity and is studying ways of improving profits. Its business is neither cyclical ner significantly sensitive to a change in the general economic situation. New equipment has come on the market that would allow Eli Company to automate a portion of its operations to increase its scale of economy and to reduce unused capacity. Variable costs would be reduced by $$4\mathrm{.}25$ per unit.

However, fixed costs would increase by$.$ $$189,000$ each month.

Required:

Part $1$:

For the proposed new operations, compute clearly $($i$)$ the degree of operating leverage $($DOL$),$ and $($ii$)$ the break$-$even$-$point in units of sales $($BEP$).(10$ marks$)$

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