Hewtex electronics manufactures two products, tape recorders and electronic calculators. Projected sales through December 31, 1998 suggest that 120,000 tape recorders and 190,000 electronic calculators will be sold this year. The projected earnings statement which follows shows that they will not meet its expected earnings goal of 9% of sales after taxes.

	120,000 Tape Recorders		190,000 Calculators
	Amount(000 omitted)	Per Unit	Amount (000 omitted)	Per Unit	Total Amount
Sales	1,800	15.00	4,480	28.00	6,280
Materials	480	4.00	1,140	6.00	1,620
Labor	360	3.00	1,710	9.00	2,070
Other	120	1.00	570	3.00	690
Committed Costs	280	2.33	1,400	7.37	1,680
Total costs	1,240	10.33	4,820	25.37	6,060
Gross margin	560	4.67	500	2.63	1,060
Facility sustaining costs					2,000
Net income before taxes					(940)

1. Assuming that the sales mix in the planning documents is achieved, how many tape recorders and electronic calculators would they need to sell in 1998 to break even?

2. What volume of sales is required if Hewtex is to earn a profit in 1999 equal to 9% of sales after taxes? They face a 42% tax rate

3. Hewtex now allocates committed costs based on flexible labor costs. A study has determined that committed costs are as follows: (1) supervisory costs for tape recorder production $500,000 (2) supervisory salaries for electronic calculator production $600,000 (3) the balance of the committed costs are proportional to the number of batches of production. Hewtex schedules tape recorders for production in batches of 1,000 and electronic calculators are made in batches of 10,000. Finally $300,000 of what was originally classified as facility sustaining cost was actually attributable to tape recorders and $400,000 was attributable to the electronic calculator line. Recast the original financial statements to correct the costing errors due to misclassification.