Question 3 (20 marks) Fortune Manufacturing is a newly established manufacturing business that plans to manufacture and sell 40,000 units per year of a new product. The following estimates have been made for the companys costs and expenses:

Question 3 (20 marks) Fortune Manufacturing is a newly established manufacturing business that plans to manufacture and sell 40,000 units per year of a new product. The following estimates have been made for the company's costs and expenses: Variable costs per unit Fixed costs Manufacturing costs: Direct materials Direct labour Manufacturing overhead 340,000 Non-manufacturing costs: Selling expenses Administrative expenses 180,000 520,000 Required: (a) If the company sets a target of earning for operating income of $280,000 by producing and selling 40,000 units during the first year of operations, compute: (i) the required contribution margin per unit; and (2 marks) (ii) the selling price per unit. (2 marks) (6) At the unit selling price computed in part (a), how many units must the company produce and sell to break even? (Assume all units produced are sold.) (2 marks) (c) What will be the margin of safety (in dollars) and margin of safety percentage if the company produces and sells 40,000 units at the selling price computed in part (a)? (5 marks) (d) Assume the marketing manager thinks that the maximum selling price of this product should not exceed $75 to ensure market penetration. Will setting the selling price at $75 enable Fortune to break-even, given the plan to manufacture and sell 40,000 units? Explain. (3 marks) (e) Distinguish between discretionary fixed costs and committed fixed costs