Part 1 (15 minutes)

Maha Asmar Company wants to introduce a new line of cosmetic kits for skin care. The kits would sell for $12 each. The variable costs associated with each kit amount to $3. If the kits are to be introduced nationwide, the company will have to obtain acceptable profits on a test market basis. The fixed costs associated withproducing the kits for the test market amount to $260,000 per year.

Required:

(a) Compute the break-even point in units for test market sales.

(b) If the desired profit level is $80,000 before tax, compute the sales level in units required to attain that profit level.

(c) Assuming the tax rate is 45% and the desired profit level is $80,000 after tax, compute the required units sales level.