Bahraincompanymanufacturestoys,which it sells toretailers.Itsproductiondepartment hassuggestedanew product, that it believes willhave good sales.Expectedvariablecosts per unit are as follows:

Costs

amount

Direct Materials

$5.25

Direct labor

$2.63

Supplies-Plant

$0.42

Selling costs

$1.1

Other

$2.6

The following are fixed costs: depreciation, $28,000;promotion$30,000;and other, $3,100.The expected selling price is $25 per unitand sales volume in units is 7000 units.

Required

1-compute

a-The number of units the company must sell tobreakeven.What doesthisnumbermean?

b-The margin of safety indollars. What is the meaning of your answer?

2- Using the same data,findthenumber ofunitsthat must be sold to earn a profit of $80,000ifpromotioncostsincreaseby$4,500.

3- Using the original data and sales of25,000 units, compute the selling price toearna profit of $150,000.

4-Ifallfixedcosts increased by 20% and management wanted to maintain the original break-even point in units, find the new selling price per unitassuming no change on the variable cost perunit.

5- According to the vice president of marketing, if the priceper unitis reduced andpromotion costsis increased, thebestannual sales estimate is35,000 units. How much more can be spent on fixedpromotioncosts if the selling price is reduced to $18.00 perunit, the variable costs cannot be reduced, and the targeted profit for sales of35,000unitsis $140,000?