Arnold Manufacturing Company has a maximum productive capacity of 210,000 units per year. Normal capacity is 180,000 units per year. Standard variable manufacturing costs are $10 per unit. Fixed factory overhead is $360,000 per year. Variable selling expense is $5 per unit and fixed selling expense is $252,000 per year. The unit sales price is $20.

The operating results for the year are as follows: sales, 150,000 units; production, 160,000 units; beginning inventory, 10,000 units. All variances are written off as additions (or deductions from) the standard cost of sales.

Required:

1. What is the breakeven point expressed in dollars sales?

2. How many units must be sold to earn a net income of $100,000 per year?

3. Prepare a formal income statement for the year under the following:

a. Absorption costing.

b. Variable costing.