Prokina Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $200.
Variable costs
Manufacturing ......... $60 per unit
Selling ............. 24 per unit
Fixed costs
Manufacturing ......... $360,000 per year
Selling and administrative ...... $162,000 per year
Required
a. Use the per-unit contribution margin approach to determine the break-even point in units and dollars.
b. Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a profit of $232,000.
c. Suppose that variable selling costs could be eliminated by employing a salaried sales force. If the company could sell 6,400 units, how much could it pay in salaries for salespeople and still have a profit of $232,000? (Hint: Use the equation method.)