Breakeven analysis Klear Camera Company is considering introducing a new video camera. Its selling price is projected to be $1,000 per unit. Variable manufacturing costs are estimated to be $500 per unit. Variable selling costs are 10% of sales dollars. The company expects the annual fixed manufacturing costs for the new camera to be $3,500,000.

Required

(a) Compute Klear’s contribution margin per unit and contribution margin ratio.

(b) Determine the number of units Klear must sell to break even.

(c) Klear is considering a design modification that would reduce the variable cost of the camera by $50 per unit. Explain whether this change will cause Klear’s breakeven point to increase or decrease, compared to the initial plans.