The Unique Office Supply Company manufactures a line of executive desk staplers. In the current year, sales output totalled 400,000 units at a sales price of $20 per unit. Fixed costs are $3,000,000 per year, and variable costs are $4 per unit. The company's income tax rate is 40%. Consider each of the following requirements independently.

REQUIRED:

1. What is the net income for the current year?

2. What is the present break-even point in units and in revenues?

3. What will the net income be next year if fixed costs increase by 20% and units sold increase by 5%? (Assume all other per-unit data remains unchanged.)

4. Given the changes anticipated in Requirement 3, what would the break-even point in units be for next year?

5. What scenario would management prefer: the current situation or the possible situation in Requirement #3? Why?

6. Refer to the original data. How many units would the company have needed to sell in the current year to earn a net income of $600,000?