The marketing department at High-tech Inc. is getting ready to launch a new product. Before doing so, they have to finalize the business case to present to the executives. The selling price is expected to be $45. The cost information for the new product is as follows:

Overhead expenses $400,000

Advertising $200,000

Raw materials $8.25/unit

Patent royalties $1.85/unit

Sales commission $2/unit

Salesperson salaries $475,000

a. What is the contribution margin per unit?

b. What volume must be sold for High-tech Inc. to break even (both in units and dollar)?

c. What is the volume in units that must be sold for the firm to make $600,000 in profit?

d. What happens to the break-even volume if managers decide to reduce the price by 18%?

e. What happens to the break-even volume if extra salespeople need to be hired (with a cost of $45,000)?