Problem 5-25 Changes in Fixed and Variable Expenses; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6]

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 $2.60 per unit. Enough capacity exists in the companys plant to produce 30,400 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.66, and fixed expenses associated with the toy would total $42,364 per month.

The company's Marketing Department predicts that demand for the new toy will exceed the 30,400 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,118 per month. Variable expenses in the rented facility would total $1.82 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 unit sales and in dollar sales. (Round "per unit" to 2 decimal places, intermediate and final answers to the nearest whole number.)

2.	How many units must be sold each month to make a monthly profit of $9,828? (Round "per unit" to 2 decimal places, intermediate and final answer to the nearest whole number.)

3.	If the sales manager receives a bonus of 20 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 27% on the monthly investment in fixed expenses? (Round "per unit" to 2 decimal places, intermediate and final answer to the nearest whole number.)