Break$-$Even and Net Income Planning

Hank Company has recently leased facilities for the manufacture of a new product. Based on studies made by its accounting personnel, the following data are available:

Estimated annual sales: $18,000$ units

Selling expenses are expected to be $10\%$ of sales, and the selling price is $$38\mathrm{.}00$ per unit. Ignore income taxes in this problem.

a$.$ Compute a break$-$even point in dollars and in units. Assume that manufacturing overhead

and administrative expenses are fixed, but that other costs are variable. Use the contribution

margin ratio percent, rounded to one decimal place, in your calculation of break$-$even in sales

dollars. Round final answers to whole numbers.

b$.$ What would net income before income tax be if $27,000$ units were sold?

c$.$ How many units must be sold to earn a net income before income tax of $15\%$ of sales?

TIP: Determine the minimum number of units assuming Hank does not sell partial units.