Impreza Company has signed a contract that requires them to produce and sell 50000 units for $8 per units. A regression model was run using 27 observations to measure total costs as a function of units. It is as follows:

Total costs=$90000+$6 per unit

The standard error of the estimate is $4000.

REQUIRED:

a. Calculate the following assuming certainty:

i. Break even in units and in dollars

ii. Sales quantity in needed to obtain an after-tax profit of $24000. Asuume that a 40 percent tax rate is used for only part ii.

iii. Sales in dollars needed to obtain a pretax profit equal to 10 percent of sales

b. Calculate the following assuming uncertainty:

i. What is the range of incomes that would be expected with 90 percent confidence?

ii. What is the probability that the firm will make a profit next year?