The cost structure of two firms competing in the same industry is represented by the following cost formulas: Company X = $1,981,000 + $45/ unit; Company Z = $992,000 + $88/unit. The selling price is $137 per unit for both companies.

Required:

1. Calculate the indifference point between the two cost structures, that is, the amount of unit sales that produce the same operating income for Company X and Company Z.

2. If sales volume were expected to increase by 25% over the next two years, which cost structure would you prefer?

	Company X
	Company Z