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XYZ, Inc is considering a change in its operating structure. Specifically, the firm is considering the use of robotic machinery to cut its labor and other variable costs. The engineers for XYZ have come up with the following:

Operating Plan	A	B	C
Variable Cost per unit	$8	$7	$6
Fixed Cost	$200,000	$350,000	$700,000

Plan A: XYZs current operating structure

Plan B: moderate use of robotic machinery

Plan C: extensive use of robotic machinery

XYZ is in a competitive market where the price of its product is currently $10/unit. This is not expected to change as a result of any change in operating structure at XYZ.

Compute the Break-even Quantity and Sales for each operating plan.

Complete the table below:

Expected Units Sold (Q)	EBIT
	A	B	C
100,000
200,000
300,000
400,000
500,000

Identify the optimal operating plan for each of the five specified levels of unit sales

Which of the operating structures is the riskiest? Which is the least risky?

Assume that expected sales are $2,000,000 (i.e. 200,000 units). Compute the Degree of Operating Leverage (DOL) for each of the three plans.

Using your results from question e, by what percent would EBIT change if sales were to increase from $2,000,000 to $2,200,000 (i.e. 10%)? Answer this for each of the three operating plans.

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