Stackhouse Company manufactures and sells its own brand of digital cameras. It sells each camera for $250. The company's accountant prepared the following data:
Manufacturing costs
Variable ................................... $90 per unit
Fixed ...................................... $300,000 per year
Selling and administrative expenses
Variable ................................... $10 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.)