Requirement 2: Single-product CVP

Assume the following additional cost data are available for FYX1 for ethernet repeaters: Selling price per unit $360.00,

Direct materials $82.70

Direct labor $40.00

Manufacturing overhead $29.60

Selling expense $20.50

Annual total fixed costs:

Manufacturing overhead $8,500,000

Selling expense $2,250,000

Administrative expense $2,250,000

As a result of changes in macroeconomic conditions, you expect the cost of direct labor to increase 18% in FYX2. Fixed administrative costs are also expected to increase in FYX2 by $300,000 due to salary increases. All other costs and expenses are expected to remain the same as in FYX1. Your divisions operating income target for FYX2 is $2.5 million.

a. If your division experiences the cost increases described, then how many ethernet repeaters will you need to sell in FYX2 to break even? (Round your answer to the nearest whole unit.) (1 point)

b. If your division experiences the cost increases described above, then what is the total sales revenue (in dollars) you will need to achieve in FYX2 to earn your divisions target operating income of $2.5 million? (1 point)