McClatchy Industries is studying the acquisition of two electrical connector systems that are integral for production of its leading product - the ROBOTECH.Data relevant to the systems follow. Model no.6: Variable costs, $16.00 per unit Annual ﬁxed costs, $985,600 Model no.4: Variable costs, $12.80 per unit Annual ﬁxed costs, $1,113,600 McClatchy's selling price is $64 per unit for the ROBOTECH, which is subject to a 5 percent sales commission.(For this problem, ignore income taxes.) Required: 1.How many units must the company sell to break even if Model 6 is selected? 2.Which of the two systems would be more proﬁtable if sales and production are expected to average 46,000 units per year? 3.Assume Model 4 requires the purchase of additional equipment that is not reﬂected in the preceding ﬁgures.The equipment will cost $450,000 and will be depreciated over a ﬁve-year life by the straight- line method.How many units must McClatchy sell to earn $956,400 of income if Model 4 is selected? As in requirement 2, sales and production are expected to average 46,000 units per year. 4.Ignoring the information presented in requirement 3, at what volume level will management be indifferent between the acquisition of Model 6 and Model 4? In other words, at what volume level will the annual total cost of each system be equal? (Hint: At any given sales volume, sales commissions will be the same amount regardless of which model is selected.)

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The Answer of McClatchy Industries is studying the acquisition of two electrical connector systems that are integral for production of its leading product - the ROBOTECH.Data relevant to the systems follow. Model no.6: Variable costs, $16.00 per unit Annual ﬁxed costs, $985,600 Model no.4: Variable costs, $12.80 per unit Annual ﬁxed costs, $1,113,600 McClatchy's selling price is $64 per unit for the ROBOTECH, which is subject to a 5 percent sales commission.(For this problem, ignore income taxes.) Required: 1.How many units must the company sell to break even if Model 6 is selected? 2.Which of the two systems would be more proﬁtable if sales and production are expected to average 46,000 units per year? 3.Assume Model 4 requires the purchase of additional equipment that is not reﬂected in the preceding ﬁgures.The equipment will cost $450,000 and will be depreciated over a ﬁve-year life by the straight- line method.How many units must McClatchy sell to earn $956,400 of income if Model 4 is selected? As in requirement 2, sales and production are expected to average 46,000 units per year. 4.Ignoring the information presented in requirement 3, at what volume level will management be indifferent between the acquisition of Model 6 and Model 4? In other words, at what volume level will the annual total cost of each system be equal? (Hint: At any given sales volume, sales commissions will be the same amount regardless of which model is selected.)

McClatchy Industries Is Studying the Acquisition of Two Electrical Connector