We Watch Inc. (WWI) sells and installs security camera systems. The CEO wants to know how many cameras they need to sell to break even:

1.Security camera systems are free with a 36-month contract. if the contract is less than 36 months, the sales price of the system to the customer is $495. The same monthly rental fee of $33 is charged regardless of whether the customer signs up for the 36-month contract or for a shorter period of time. All customers have taken the free offer.

2. In fiscal 2016, there were 325 new systems sold. This is an increase over fiscal 2015

where 150 new systems were sold.

3. The cost to WWI of providing the free system is:

i) System material cost is $230 per system in fiscal 2016; it was $225 in fiscal

2015.

ii) Installation is $100 per system. To date, Joe has done approximately half of the

installations himself at no cost to the company. Now that the sales volume has

increased, he expects to have to pay for a greater percentage of the installations.

4. A third party service, provides monitoring services for WWI's customers.

The camera monitoring expense paid by WWI was initially 15% of the monitoring

revenue, but increased to 20% on January 1, 2016. This increase resulted in a

combined rate of 17% of monitoring revenue for the year ended May 31, 2016.

5. From 2016 Income Statement

Monitoring sales $123,750

Expenses:

System material74,750

Alarm monitoring 21,038

Installation 16,000

6. From 2015 Income Statement

Monitoring sales $29,700

Expenses:

System material33,750

Alarm monitoring 4,455

Installation 7,000