Hewtex Electronics manufactures two products, tape recorders and electronic calculators, and sells them nationally to wholesalers and retailers. The Hewtex management is very pleased with the company 's performance for the current fiscal year. Projected sales through December 3 1 , 1 998, suggest that 120,000 tape recorders and 1 90,000 electronic calculators will be sold this year. The projected earnings statement, which follows, shows that Hewtex will not meet its earnings goal of 9% of sales after taxes.

Required

( I ) Assuming that the sales mix in the planning documents is achieved, how many tape recorder and electronic calculator units would Hewtex Electronics have to sell in 1 998 ro break even?

(2) What volume of sales is required if Hewtex Electronics is to earn a profit in 1999 equal to 9% of sales after taxes? Hewtex Electronics faces a tax rate of 42%.
(3) Hewtex Electronics now allocates committed costs based on flexible labor costs. A study has determined that committed costs are as follows: ( l ) supervisory costs for tape recorder production-$500,000; (2) supervisory salaries for electronic calculator production-$
600,000; (3) the balance of the committed costs are proportional to the number of batches of production. Hewtex Electronics schedules tape recorders for production in batches of 1000, and electronic calculators are made in batches of 10,000.
Finally, $300,000 of what was originally classified as facility-sustaining cost was actually attributable to tape recorders, and $400,000 was attributable to the electronic calculator line. Recast the original financial statements to correct the costing errors due to misclassification.

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HEWTEX ELECTRONICS Projected Earnings Statement For the Year Ended December 31, 1998 120,000 UNITS 190,000 UNITS TAPE RECORDERS ELECTRONIC CALCULATORS Total Amount Total Amount (000 omitted) Per Unit (000 omitted) Per Unit TOTAL (000 omitted) Sales Flexible costs Materials Labor $1,800 $15.00 $4,480 $28.00 $6,280 480 4.00 1,140 6.00 1,620 360 3.00 1,710 9.00 2,070 Other 120 1.00 570 3.00 690 Committed costs 280 2.33 1,400 7.37 1,680 Total costs 1,240 10.33 4,820 25.37 6,060 Gross margin 560 4.67 500 2.63 1,060 Facility-sustaining costs 2,000 Net income before income taxes (940)