Carumba Inc.’s 2012 budget includes the following items:

Sales............80,000 units

Production.........80,000 units

Direct materials used....... $600,000

Direct labour........ 400,000

Variable overhead...... 720,000

Fixed overhead...... 400,000

Variable selling costs...... 260,000

Fixed selling costs...... 250,000

Administrative costs (all fixed) ... 150,000

The company’s tax rate is 30%.

REQUIRED

1. At what price would the company break even?

2. If the company were to sell only 60,000 units, what price would produce a before-tax profit of 20% of sales?

3. Majestix Inc. has offered to supply Carumba with 80,000 units at a price of $28/unit.

Should Carumba accept the offer? Explain.

4. What price would produce an after-tax profit of $350,000?