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The cost structure of two firms competing in the same industry is represented by the following cost formulas: Company X = dollar2,276,000 + dollar50/unit: Company
The cost structure of two firms competing in the same industry is represented by the following cost formulas: Company X = dollar2,276,000 + dollar50/unit: Company Z = dollar1,052,000 + dollar98/unit. The selling price is dollar145 per unit for both companies. Required: Calculate the indifference point between the two cost structures, that is, the amount of unit sales that produce exactly the same operating income for Company X and Company Z. If sales volume were expected to increase by 25% over the next two years, which cost structure would you prefer? Company Z Company X
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