Question

At what level of sales​ (in units) would the company be indifferent between the two lease​ options? Show your proof. Begin by selecting the equation to determine the indifference point. ​(Abbreviations used" FC​ = Fixed​ costs, VCU​ = Variable costs per​ unit) (VCU (option A) x Units) + FC (option A) = (VCU (option B) x Units) + FC (option B) The indifference point is candles.

Answer 1

To determine the level of sales at which the company would be indifferent between the two lease options, set the costs of the options equal to each other.

Step-by-step explanation:

To determine the level of sales at which the company would be indifferent between the two lease options, we need to set the costs of the two options equal to each other. Let's define the variables first:

• VCU (option A) = Variable costs per unit for option A
• VCU (option B) = Variable costs per unit for option B
• FC (option A) = Fixed costs for option A
• FC (option B) = Fixed costs for option B
• Units = Number of units sold

The equation to determine the indifference point is:
(VCU (option A) x Units) + FC (option A) = (VCU (option B) x Units) + FC (option B)

By solving this equation, you can find the level of sales (in units) at which the company would be indifferent between the two lease options.

Answer 2

450 units

Step-by-step explanation:

The computation of the level of sales in units would become indifference is shown below:

VCU (option A) × Units) + FC (option A) = (VCU (option B) × Units) + FC (option

B)

{($6 + $3 + $3 × n) + $3,000} = {($6 + $3 + $3 + $30 × 10% × n) + $1,650}

($12 × n + $3,000) = ($12 + $3 × n + $1,650)

($12 × n + $3,000) = ($15 × n + $1,650)

$15n - $12n = $3,000 - $1,650

$3n = $1,350

n = 450 units

hence, the level of sales units is 450 units