Reference no: EM132528668
Selling price per unit (package of 2 CDs)......................................$20.00
Variable costs per unit:
Direct material...............................................................................................................$4.00
Direct labor......................................................................................................................$5.00
Artist's royalties..............................................................................................................$3.50
Manufacturing overhead..........................................................................................$3.00
Selling expenses............................................................................................................$1.00
Total variable costs per unit............................................................$16.50
Annual fixed costs:
Manufacturing overhead..........................................................................................$180,000
Selling and administrative.......................................................................................$220,000
Total fixed costs................................................................................$400,000
Forecasted annual sales volume (120,000 units).........................$2,400,000
- Management estimates that direct-labor costs will increase by 8% next year.
Question 1: How many units will the company have to sell next year to reach its break-even point?
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