Inland Company has signed a contract that requires them to produce and sell 50,000 units for $5 per unit. A regression model was run using 22 observations to measure total costs as a function of units. It is as follows:

Total costs = $120,000 + $2 per unit

The standard error of the estimate is $10,000.

Required:

a. Calculate the following assuming certainty:

i. Breakeven in units and dollars

ii. Sales quantity needed to obtain an after-tax profit of $21,000. Assume that a 30 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?