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Suppose there are NO manufacturing capacity constraints for the manufacture of the new product at either the company's own plant or the rented facility.
Question (i) At what level of non-zero production and sales (in units) would you expect the company to be indifferent between the two manufacturing facilities?
Question (ii) Calculate the degree of operating leverage at a monthly sales level of 50,000 units at EACH manufacturing facility.
Question (iii) Which one of the two manufacturing facilities will be MORE advantageous for the manufacture of the new product, assuming the marketing department predicts very strong and increasing demand for the new product? Explain, strictly on the basis of the degree of operating leverage calculations in Part c (ii) above.
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