Milton Company manufactures and sells its own brand of digital cameras. It sells each camera for $200. The company’s accountant prepared the following data:
Manufacturing costs
Variable ............ $64 per unit
Fixed ............. $300,000 per year
Selling and administrative expenses
Variable ............ $16 per unit
Fixed .............. $60,000 per year
Required
a. Use the per-unit contribution margin approach to determine the break-even point in units and dollars.
b. Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a $120,000 profit.
c. Suppose that variable selling and administrative costs could be eliminated by employing a salaried sales force. If the company could sell 4,200 units, how much could it pay in salaries for the salespeople and still have a profit of $120,000? (Hint: Use the equation method.)