1. Red Sunset Co. manufactures mobile phones and wants to add a new model to its current line of products. The firm has estimated that the new phones selling price will be $100 and that variable costs would represent 75% of the sale price. Fixed operating costs are estimated to be $15M. The firm also has forecasted that interest expenses associated with the new chip will reach $5M. Marginal tax rate is 25%. If Red Sunset Co. expects to sell 1million units of the new phone, then answer the following questions (Q.18-20).

   18.How much is the variable costs given a sale forecast of 1 million units of new phone?

   		$85 million
   		$53 million
   		$60 million
   		$75 million

7 points

QUESTION 19

1. How much is the net income given the sales of 1 million units?

   		$1.8 million
   		$2.35 million
   		$2.5 million
   		$3.75 million

7 points

QUESTION 20

1. How many units Red Sunset Co. needs to sell to achieve an EBIT (Earnings before interest and taxes) of $5 million.

   		500,000
   		700,000
   		800,000
   		300,000