Binder Inc. (Binder) manufactures heating blankets for the health-care market. Each heating blanket sells for $50. The variable costs per unit are as follows:

Direct materials

$15

Direct labour

5

Variable manufacturing overhead

4

Budgeted fixed manufacturing overhead is estimated at $500,000, and budgeted fixed selling, general, and administrative costs are expected to be $300,000. Variable selling costs are $6 per unit. Binder estimates that it can sell 50,000 heating blankets.

Binder is subject to tax at a rate of 30%.

Required:

a) Determine the break-even point for the heating blankets (in units). (1.5 marks)

b) Determine the number of heating blankets (in units) that must be sold for Binder to earn $100,000 in profit after taxes. (1.5 marks)

c) Determine the dollar amount of heating blanket sales that must be attained in order to earn $300,000 in profit after taxes. (1 marks)

d) Binder is considering adding a second product line to its sales mix: a thermal blanket. Binder estimates that it can sell 25,000 units of the thermal blanket at $30 per unit. The total variable costs would be $12. This second product would increase fixed costs by $50,000. Calculate the break-even volume (in units) of the heating blanket and the thermal blanket. (3.5 marks)