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 $5.50 per unit. Enough capacity exists in the companys plant to produce 20,000 units of the toy each month. Variable costs to manufacture and sell one unit would be $2.75, and fixed costs associated with the toy would total $70,000 per month.

The companys Marketing Department predicts that demand for the new toy will exceed the 20,000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed cost of $5,000 per month. Variable costs in the rented facility would total $3.00 per unit, due to somewhat less efficient operations than in the main plant.

Required:

1. Compute the monthly break-even point for the new toy in units and in total dollar sales. Show all computations in good form.

2. How many units must be sold each month to make a monthly profit of $3,000?

3. If the sales manager receives a bonus of 5 cents for each unit sold in excess of the break-even point, how many units must be sold each month to earn a return of 4.9% on the monthly investment in fixed costs?