CVP analysis, decision making. (M. Rajan, adapted) Tocchet Company manufactures CB1, a citizens’ band radio that is sold mainly to truck drivers. The company’s plant in Camden has an annual capacity of 50,000 units. Tocchet currently sells 40,000 units at a selling price of

$126. It has the following cost structure:

Variable manufacturing costs per unit $ 54 Fixed manufacturing costs $960,000 Variable marketing and distribution costs per unit $ 12 Fixed marketing and distribution costs $720,000 Required

(Consider each question separately.)

1. Calculate the breakeven volume in units and in dollars.

2. The marketing department indicates that decreasing the selling price to $118.80 would stimulate sales to 50,000 units. This strategy will require Tocchet to increase its fixed costs, although variable costs per unit will remain the same as before. What is the max¬

imum increase in fixed costs for which Tocchet will find .it worthwhile to reduce the selling price?