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:

Year Sales ($000)

1. 1,100
2. 1,075
3. 1,200
4. 1,250
5. 1,150
6. 1,100
7. 1,125

• 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?