with information of,

• cost-volume-profit analysis to determine the level of sales required to earn an annual pre-tax profit of $3.0 million.
• the selling price will be d $98 per treatment
• variable costs per treatment to be $25.50. Excluded from this amount is $8 they have to pay in royalties to the inventor. the $25.50 variable costs are $12.50 for potential product litigation costs
• sean has estimated annual fixed costs will be $18 million
• they both agreed that the $12.50 would not be included in the report that went to the executive committee

Question 1) is how to calculate the monthly level that would required to achieve the annual profit target. the $12.50 is to be included in the calculation.

Question 2) What is the dollar effect on the projected required monthly sales level if the $12.50 was excluded?