The cost structure of two firms competing in the same industry is represented by the following cost formulas: Company X = $2,096,000 + $47/ unit; Company Z = $1,016,000 + $92/unit. The selling price is $140 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 exactly the same operating income for Company X and Company Z.
Indifference point volume ____units
2. If sales volume were expected to increase by 25% over the next two years, which cost structure would you prefer?
Company Z or Company X