Comfort Ltd manufactures a line of womans shoes that are sold in stores Australia wide. The financial controller Mr Caddy has just received the sales forecast for the coming year for the companys three main product lines: hiking boots, summer sandals and evening heels. The company has experienced considerable variation in sales volume and variable costs over the past two years and Mr Caddy believes the forecast should be carefully evaluated from a cost volume viewpoint. The preliminary budget information for 2011 follows:

	Hiking Boots	Summer Sandals	Evening Heels
Unit sales	50,000	50,000	100,000
Unit selling price	$84	$108	$144
Variable manufacturing cost per unit	39	36	75
Variable selling cost per unit	15	12	18

For 2011 the companys fixed selling and administrative expenses are forecasted to be $7,800,000. The company has a tax rate of 40%

REQUIRED

1. Assuming the sales mix remains as budgeted, determine how many units of each product Comfort Ltd must sell in order to break even in 2011.
2. Calculate the companys budgeted net income for 2011
3. If the company wishes to achieve a targeted pre tax profit of $1,200,000 how many units overall would have to be sold?
4. After preparing the original estimates, the company received a letter from their overseas supplier advising them of a 20 percent increase in the leather they purchase to make their evening heels . Furthermore it was discovered that the variable selling cost of the summer sandles could be expected to increase by $4 per unit and the variable selling cost of the hiking boots are expected to decrease by $2 per unit.

1. Under these circumstances, determine how many units of each product Comfort Ltd would have to sell in order to breakeven in 2011.
2. Discuss the impact of these adjustments to the companys break even point.
3. Based on your calculations in part D, advise the financial controller Mr Caddy of THREE possible ways to reduce the break even point.