Child's Play Company makes a plastic rattle for toddlers. The rattle is generally marketed through exclusive retailers located in upscale shopping malls. The company used 23 retailers. In late 2016, Diana Suares, the president of the company, was considering alternative marketing plans presented to her by Bill Dings, the marketing manager. Based on sales from January through October 2016, Diana expected that 2016sales would amount to 300,000 units at $8.00 per unit.

Diana Suares also had with her some cost data for 2016supplied by the CFO, Don Capp. Don expects that these costs are reliable estimates for a volume up to 400,000 units. Beyond 400,000 units, the company would have to rent additional machines (with a capacity of 100,000 units each) at an annual cost of $50,000 per machine (in 2016). The data are presented in Exhibit A.

Total fixed manufacturing and selling and administrative costs are each expected to increase in 2017by 10 percent because of inflation. Variable costs per unit and the selling price would stay the same as in 2016.

Exhibit A (2016Cost Data)

Manufacturing costs for rattles (based on production volume of 300,000 units).

Direct material $0.80 per unit *

Direct labor $10 per hour * (Each worker can make 20 units in an hour)

Packaging $0.75 per unit *

Power, supplies, indirect labor, and other variable production costs $1.20 per unit *

Supervisory salaries, equipment rental, and miscellaneous production costs $1.80 per unit *

These costs vary in total with production volume

Selling and administrative costs (based on sales volume of 300,000 units).

Commissions to sales staff 10% of price to retailer **

Shipping $0.50 per unit **

Advertising and promotion $0.60 per unit

Administrative staff salaries, depreciationon office equipment, etc $0.90 per unit **

These costsvary in total with sales volume. 2RequiredFor 2017:

14. What is the contribution margin at the break even volume?

15. What is the break even volume?

16. What is the profit at 1000 units above break even?

17. What is the profit at 2000 units below the break even?