Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020.

Selling price per unit $50.00

Production Costs: Direct Materials . $10.00

Direct Labour . $8.00

Variable Manufacturing Overhead . $7.00

Fixed Manufacturing Overhead....................... $450,000

Fixed Selling & Administrative Expenses $300,000

Variable selling expense per unit . $10.00

Requirements:

a) The recession in the economy in 2021 is expected to result in a reduction of the number of units sold. Assuming that Greek is operating at normal capacity, by how much can sales decline in units and sales dollars in 2021 without the company making a loss?

b) The President of Greek Manufacturing is under pressure from shareholders to increase operating income by 30% in 2021. Management expects per unit data and total fixed costs to remain the same in 2021. Using the equation method, compute the number of units that would have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal?

c) What are the advantages and disadvantages of the scattergram method as compared to the high-low method?