At what volume would the operating profit be the same

Reference no: EM132828987

Question - Canton Corp. produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts. The first (unit-rate lease) is one where Canton would pay $4 per unit produced, regardless of the number of units. The second lease option (flat-rate lease) is one where Canton would pay $60,000 per month, regardless of the number produced. The lease will run one year and the lease option chosen cannot be changed during the lease. All other lease terms are the same.

The part sells for $40 per unit and unit variable cost (excluding any machine lease costs) are $20. Monthly fixed costs (excluding any machine lease costs) are $200,000.

At what volume would the operating profit be the same regardless of the lease option chosen?

Reference no: EM132828987

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