QUESTION 5

The Gary-Elliott Corporation manufactures a kitchen appliance to sell for $280. Last year the company sold 2,000 of these appliances, realizing a gross profit that amounted to 25% of the cost of goods sold. Of this total cost of goods sold, materials accounted for 40% of the total and factory overhead for 15%.

During the coming year it is expected that materials and labor costs will each increase by 25% per unit and that factory overhead will increase by 15% per unit. To meet these rising costs, a new selling price has to be set.

You are required to compute the number of units that must be sold to realize the same total gross profit in the coming year as realized last year if the new selling price is at:

5.1$300;

5.2$325;

5.3$350.