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Indianapolis Tool Company (ITC) manufactures a line of electric garden tools that are sold in general hardware stores. The company's controller, Will Gwinnett, has just

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Indianapolis Tool Company (ITC) manufactures a line of electric garden tools that are sold in general hardware stores. The company's controller, Will Gwinnett, has just received the sales forecast for the coming year for ITC's three products: hedge clippers, weeders, and leaf blowers. ITC has experienced considerable variations in sales volumes and variable costs over the past two years, and Gwinnett believes the forecast should be carefully evaluated from a cost-volume-profit viewpoint. The preliminary budget information for 2020 follows: Hedge clippers Weeders Leaf blowers Unit sales 50,000 50,000 100,000 Unit selling price $36 28 48 Variable manufacturing cost per unit |12 13 25 Variable selling cost per unit 4 5 6 For 2020, ITC's fixed manufacturing overhead is budgeted at $2,000,000, and the company's fixed selling and administrative expenses are forecasted to be $600,000. ITC has a tax rate of 40 percent. Required: 1. Assuming the sales mix (in sales volume) remains as budgeted, determine how many units of each product ITC must sell in order to break even in 2020. 2. After preparing the original estimates, management determined that its variable manufacturing cost of leaf blowers would increase by 20 percent, and the variable selling cost of hedge clippers could be expected to increase by $1.00 per unit. However, management has decided not to change the selling price of either product. In addition, management has learned that its leaf blower has been perceived as the best value on the market, and it can expect to sell three times as many leaf blowers as each of its other products. Under these circumstances, determine how many units of each product ITC would have to sell in order to break even in 2020

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