Meadowlands Design produces head covers for golf clubs. The company expects to generate a profit next year. It anticipates fixed manufacturing costs of $200,500 and fixed general and administrative expenses of $80,000 for the year. Variable manufacturing and selling costs per set of head covers will be $8 and $12, respectively. Each set will sell for $30.
1. Compute the breakeven point in sales units.
2. Compute the breakeven point in sales dollars.
3. If the selling price is increased to $34 per unit and fixed general and administrative expenses are cut to $37,500, what will the new breakeven point be in units?
4. Prepare a graph to illustrate the breakeven point computed in 3.