Company has signed a contract that requires tanhem to produce and sell 60,000 units for $8 per units. A regression model was run using 27 observations to measure total costs as a function of units. It is as follows:

Total costs = $100,000 + $6 per unit

The standard error of the estimate is $8,000.

Required:

a. Calculate the following assuming certainty:

1. Breakeven in units and in dollars

2. Sales quantity in needed to obtain an after-tax profit of $24,000. Assume that a 40 percent tax rate is used for only part 2.

3. Sales in dollars needed to obtain a pretax profit equal to 10 percent of sales.

b. Calculate the following assuming uncertainty:

1. What is the range of incomes that would be expected with 90 percent confidence?

2. What is the probability that the firm will make a profit next year?