The South American Division of Worldwide Reference Corporation produces a pocket reference book containing brief descriptions of key historical and cultural sites in each South American country. Annual budget data for the coming year follow. Projected sales are 100,000 books.

Required:
1. Calculate the break-even point in units and in sales dollars.
2. If the division is subject to an income-tax rate of 25 percent, compute the number of units the company would have to sell to earn an after-tax profit of $90,000.
3. If fixed costs increased $31,500 with no other cost or revenue factor changing, compute the firm’s break-even sales in units.
4. Focusing on operating profit (i.e., before-tax profit), prepare a profit-volume graph for the South American Division.
5. Due to a possible change in the political situation in the country in which the South American Division is located, management believes the country’s government may reduce the tax rate to 20 percent. Assuming all other data as in the original problem, how many pocket reference books must be sold to earn $90,000 after taxes?

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Sales Costs: Direct material Direct labor Manufacturing overhead Selling and administrative Total costs............. Budgeted operating income Fixed $-0- -0- 100,000 110,000 $210,000 Variable $300,000 200,000 150,000 50,000 $700,000 $1,000,000 910,000 $ 90,000