Managerial Accounting: Chapter 6: Cost-Volume-Profit Relationships

Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3.30 per unit. Enough capacity exists in the company's plant to produce 31,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $2.08, and fixed expenses associated with the toy would total $56,230 per month The company's Marketing Department predicts that demand for the new toy will exceed the 31,000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,812 per month. Variable expenses in the rented facility would total $2.31 per unit, due to somewhat less efficient operations than in the main plant. Required: 1. What is the monthly break-even point for the new toy in unit sales and dollar sales. 2. How many units must be sold each month to attain a target profit of $12,771 per month? 3. If the sales manager receives a bonus of 15 cents for each unit sold in excess of the break-even point, how many units must be sold each month to attain a target profit that equals a 28% return on the monthly investment in fixed expenses? (For all requirments, Round "per unit" to 2 decimal places, intermediate and final answers to the nearest whole number.) 1 units Break-even point in unit sales Break-even point in dollar sales Unit sales needed to attain target profit Unit sales needed to attain target profit 2 3