High Quality Toy's projected operating income for 2016 is $1 million, based on a sales volume of 90,000 units. High Quality sells The Toy for $35 per unit. Variable costs consist of the $14 purchase price and a $1 shipping and handling cost. High Quality's annual fixed costs are $800,000.
Instructions
(a) Calculate the company's break-even point in units.
(b) Calculate the company's operating income in 2016 if there is a 10% increase in projected unit sales.
(c) For 2017, management expects that the unit purchase price of The Toy will increase by 30%. Calculate the sales revenue the company must generate in 2017 to maintain the current year's operating income if the selling price remains unchanged.