Question

Check my work Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $2.80 per unit. Enough capacity exists in the company's plant to produce 30,800 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.78, and fixed expenses associated with the toy would total $46,624 per month. Print The company's Marketing Department predicts that demand for the new toy will exceed the 30,800 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,331 per month. Variable expenses in the rented facility would total $1.96 per unit, due to somewhat less efficient operations than in the main plant. Required: 1. What is the monthly break-even point for the new toy in unit sales and dollar sales. 2. How many units must be sold each month to attain a target profit of $10,416 per month? 3. If the sales manager receives a bonus of 20 cents for each unit sold in excess of the break-even point, how many units must be sold each month to attain a target profit that equals a 22% return on the monthly investment in fixed expenses? (For all requirments, Round "per unit" to 2 decimal places, intermediate and final answers to the nearest whole number.) units Break-even point in unit sales Break-even point in dollar sales Unit sales needed to attain target profit Unit sales needed to attain target profit units 2. 3. units

Answer 1

1
	Sales per unit	$2.80
Less:	Variable cost per unit	$1.96
	Contribution margin per unit	$0.84
	CM ratio($0.84/$2.80)	30%
	Fixed expenses($46,624+$2,331)	$48,955
	Break even point in units(Fixed costs/CM per unit)	58280	units
	Break even point in dollars(Fixed costs/CM ratio)	$1,63,183
2	Target Profit	$10,416
	Add:Fixed costs	$48,955
	Traget Contribution	$59,371
	Target Sales in $($59,371/30%)	$1,97,903
	Units sales required($197,903/$2.80)	70680	units
3	Fixed Costs	$48,955
	Target Profit($48,955*22%)	$10,770
	Add:Fixed costs	$48,955
	Traget Contribution	$59,725
	Target Sales in $($59,725/30%)	$1,99,084
	Units sales required($199,084/$2.80)	71101	units