10 MARKS

The following information is presented for XYZ company Expected variable unit costs: $ Direct materials 11.00 Direct labour 5.60 Selling expenses 2.00 Expected annual fixed costs: $ Rent of building 28,000 Manager's salary 60,000 Maintenance contract 15,500 Administrative expenses 20,500 The product is to be sold for $35.00 per unit. a) Compute the number of units that must be sold to break-even. (5 Marks) b) Compute the number of units that must be sold if administrative expenses rise to $35,000, selling expenses fall by 50c a unit and a target profit of $120,000 is required