The modern Washburn Guitars company started in 1977. Bill Abel, Washburns vice president of sales, is responsible for reviewing and approving prices for the companys line of guitars. Setting a sales target of 2,000 units for a new line of guitars, he is considering a suggested price of $174.5 per unit when it sells its guitar to the wholesalers. Looking at Washburns financial data for its present plant, Abel estimates that this line of guitars must bear these fixed costs: Rent and taxes are $14,000, depreciation of equipment is $4,000, Management and quality control is $20,000. In addition, he estimates material and labor cost for each unit to be: direct materials is $25/unit and direct labor is $120/unit. What is the break-even point for the new line of guitars if the price Washburn sells its guitars to the wholesalers is $174.50

b. If Washburn achieves the sales target of 2,000 units at the $174.50 wholesale price, what will its profit be?

c. If Washburn achieves the sales target of 2,000 units. Should it set a price at $154.5?

d. Caught in the global competition for guitar sales, Washburn continually searches for ways to reduce and control costs. Washburn recently purchased Parker Guitar and will combine the two production facilities in a new location. Washburn expects the acquisition to lower its costs. Specifically, Washburn projects that its new factory location will reduce its rent and taxes expenses by 40 percent, and the new skilled employees will reduce the labor cost for each unit by 15 percent. Assume that the merger with Parker leads to the cost reductions projected in the case. What will be the new break-even point at a $174.5 wholesale price