Gates Rubber Company sells cases of hydraulic hoses for $125. Direct materials and direct labour (together) per case are $75. There is an additional selling commission of $12.50 per case. Fixed manufacturing costs total $2,900 per month, while fixed selling and administrative costs total $1,000 per month.

Required:

Calculate Breakeven in units

Calculate BE in Sales

Answer 4a and 4b. Each scenario is INDEPENDENT of each other.

4 a) If the manager negotiates an extra $4.00 commission on every case they sell after the breakeven point, what would operating income be if they sold 140 cases?

4b) Back to the original information (no additional commission)

Management has set a revenue (sales) target at a level of $70,000 (or 560 cases). They believe that spending an additional $2,400 on advertising will be necessary to reach that target. What is operating income if the additional $2,400 is spent and the revenue target is met?

What is the new breakeven point in units?

What is the new breakeven in Sales?