Question
Fanning Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $48. Variable costs Manufacturing $ 18 per
Fanning Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $48.
Variable costs | |||
Manufacturing | $ | 18 | per unit |
Selling | 4 | per unit | |
Fixed costs | |||
Manufacturing | $ | 154,000 | per year |
Selling and administrative | $ | 189,200 | per year |
Required
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Use the per-unit contribution margin approach to determine the break-even point in units and dollars.
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Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a profit of $187,200.
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Suppose that variable selling costs could be eliminated by employing a salaried sales force. If the company could sell 20,300 units, how much could it pay in salaries for salespeople and still have a profit of $187,200? (Hint: Use the equation method.)
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