Union Water Purification Company (UWPC) is evaluating two possible designs for a new production facility to replace their present obsolete facility. The total cost functions for the two facilities are:

TC1 = 550,000 + 600Q

TC2 = 300,000 + 825Q

Both plants would produce an identical desalination device that sells for $2,600 per unit. UWPC foresees no change in demand and intends to estimate sales from an average of the last seven years:

YearSales ($000)

11,100

21,075

31,200

41,250

51,150

61,100

71,125

Calculate the operating leverage for both plant designs.

Find the level of production at which neither plant design has an advantage.

Considering the sales information given, which plant design has a greater probability of cost savings?