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Kea Company manufactures and sells a specialised cordless telephone for high electromagnetic radiation environments. The company's contribution format income statement for 2020 is given below:

Kea Company manufactures and sells a specialised cordless telephone for high electromagnetic radiation environments. The company's contribution format income statement for 2020 is given below:

$

Sales (20,000 phones)

1,200,000

Variable expenses

900,000

Contribution margin

300,000

Fixed expenses

240,000

Net operating income

$ 60,000

Management is anxious to increase the company's profit and has asked for an analysis of a number of items.

(a) Calculate the company's breakeven point in unit sales.

(b) Assume that next year management wants the company to earn a before-tax profit of at least $90,000. How many phones will have to be sold to earn this target profit?

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