A Base Company produced and sold 60,000 backbacks during the year just ended at an average price of $20 per unit. Variable manufacturing costs were $8 per unit, and variable marketing costs were $4 per unit sold. Fixed costs amounted to $180,000 for manufacturing and $72,000 for marketing. There was no year end WIP inventory. No income taxes.
1. Compute Base company s break even point in sales dollars for the year.
2. Compute the number of sales units required to earn a net income of $180,000 during the year.
3. Base Company s variable manufacturing costs are expected to increase by 10% in the coming year. Compute the firm s break even point in sales dollars for the coming year.
4. If Base Company s variable manufacturing costs do increase by 10%, compute the selling price that would yield the same contribution margin ratio in the coming year.