Surreal Sound, Inc., manufactures and sells compact disks. Price and cost data are as follows:

Selling price per unit (package of two CDs)	$	25.00
Variable costs per unit:
Direct material	$	8.20
Direct labor		4.00
Manufacturing overhead		6.00
Selling expenses		1.60
Total variable costs per unit	$	19.80
Annual fixed costs:
Manufacturing overhead	$	288,000
Selling and administrative		414,000
Total fixed costs	$	702,000
Forecasted annual sales volume (140,000 units)	$	3,500,000

In the following requirements, ignore income taxes.

Required:

1.

What is Surreal Sounds break-even point in units? (Do not round intermediate calculations.)

2.

What is the companys break-even point in sales dollars? (Do not round your intermediate calculations.)

3.

How many units would Surreal Sound have to sell in order to earn $390,000? (Do not round intermediate calculations.)

4.	What is the firms margin of safety?

5.	Management estimates that direct-labor costs will increase by 10 percent next year. How many units will the company have to sell next year to reach its break-even point? (Do not round intermediate calculations.)

6.	If the companys direct-labor costs do increase by 10 percent, what selling price per unit of product must it charge to maintain the same contribution-margin ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.)