Deng Corp. produces hydraulic lifts that are used by hospitals to move bedridden patients. The costs of manufacturing and marketing the hydraulic lifts at the companys standard normal volume of 4,200 units per month are as follows:

Cost per Unit of Hydraulic Lifts

Unit Manufacturing Costs
Variable materials	$	510
Variable labour		765
Variable overhead		410
Fixed overhead		720
Total unit manufacturing costs	$	2,405

Unit Marketing Costs
Variable	$	255
Fixed		685
Total unit marketing costs		940
Total unit costs	$	3,345

Required:

1.

At a sales price of $6,230 per unit, calculate (a) the break-even volume in units and (b) the break-even sales in dollars. (Round up "Break-even volume in units" to the next whole number. Do not round other intermediate calculations.)

A) What is the break even Volume in units?

B) What is the break even sales in dollars?

2-a.

Market research indicates that, if the unit sale price were reduced from $6,230 to $5,730, the monthly sales volume would increase to 4,700 units, which is well within production capacity limitations. Assuming the same cost patterns as shown above, what would be the dollar impact on monthly sales, costs, and income?

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	Original	Revised
Sales

2-b.

Should the price be reduced?

3.

Deng is considering implementing a quality inspection system, which will increase the fixed manufacturing overhead costs per unit to $550. However, this will reduce the average materials, labour, and variable overhead costs by $11, $21, and $13 per unit, respectively. Compute the new break-even sales in units and dollars. At a sales level of 4,200 units, will the implementation of the quality inspection system result in a higher profit? Compute the profit impact of this change at a sales level of 4,700 units.(Round up "Break-even volume in units" to the next whole number. Do not round other intermediate calculations.)

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income level prior to quality-related changes
SALES	@4,200 UNITS	@4,700 UNTS

income level after quality-related cahnges
SALES	@4200 units	@ 4700 units

4a) What is the break even Volume in units?

4b) What is the break even sales in dollars?