The Monteiro Manufacturing Corporation manufactures and sells folding umbrellas. The corporation's condensed income statement for the year ended December 31, 2006 follows:

Monteiro's budget committee has estimated the following changes for 2007:
\(30 \%\) increase in number of units sold \(20 \%\) increase in material cost per unit \(15 \%\) increase in direct labor cost per unit \(10 \%\) increase in variable 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 considered that for budget purposes any change in inventory valuation can be ignored. The composition of the cost of a unit of finished product during 2006 for materials, direct labor, and manufacturing support, respectively, was in the ratio of 3:2:1. In 2006, \(\$ 40,000\) of manufacturing support was for fixed costs. No changes in production methods or credit policies were contemplated for 2007.
Required

a. Compute the unit sales price at which the Monteiro Manufacturing Corporation must sell its umbrellas in 2007 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.

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