Budgeted profit, what-if analysis The Monteiro Manufacturing Corporation manufactures and sells folding umbrellas. The corporation's condensed income statement for 1999 follows:

Monteiro s budget committee has estimated the following changes for 2000:
30% increase in number of units sold 20% increase in material cost per unit 15% increase in direct labor cost per unit 10% increase in flexible indirect cost per unit 5% increase in indirect capacity-related costs 8% increase in selling expenses, arising solely from increased volume 6% increase in administrative expenses, reflecting anticipated higher wage and supply price levels; any changes in administrative expenses caused solely by increased sales volume are considered immaterial. As inventory quantities remain fairly constant, the budget committee con¬ sidered that for budget purposes any change in inventory valuation can be ig¬ nored. The composition of the cost of a unit of finished product during 1999 for materials, direct labor, and manufacturing support, respectively, was in the ratio of 3:2:1. In 1999, $40,000 of manufacturing support was for capacity- related costs. No changes in production methods or credit policies were con¬ templated for 2000.
REQUIRED

(a) Compute the unit sales price at which the Monteiro Manufacturing Corpo¬ ration must sell its umbrellas in 2000 in order to earn a budgeted profit of $200,000.

(b) Unhappy about the prospect of an increase in selling price, Monteiro's sales manager wants to know how many units must be sold at the old price to earn the $200,000 budgeted profit. Compute the number of units which must be sold at the old price to earn $200,000.

(c) Believing that the estimated increase in sales is overly optimistic, one of the company's directors wants to know what annual profit is likely if the selling price determined in

(a) is adopted but the increase in sales volume is only 10%. Compute the budgeted profit in this case.(LO 8)

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Sales (200,000 units) $1,000,000 Cost of goods sold 600,000 Gross margin 400,000 Selling expenses $150,000 Administrative expenses 100,000 250,000 Net profit (before income taxes) $ 150,000