Cambridge Manufacturing is evaluating the introduction of a new product that would have a unit selling price of $100. The total annual fixed costs are estimated to be $200,000, and the unit variable costs are projected at $60. Forecast sales volume for the first year is 8000 units.
a. What sales volume (in units) is required to break even?
b. What volume is required to generate a net income of $100,000?
c. What would be the net income at the forecast sales volume?
d. At the forecast sales volume, what will be the change in the net income if fixed costs are:
(i) 5% higher than expected?
(ii) 10% lower than expected?
e. At the forecast sales volume, what will be the change in the net income if unit variable costs are:
(i) 10% higher than expected?
(ii) 5% lower than expected?
f. At the forecast sales volume, what will be the change in the net income if the unit selling price is:
(i) 5% higher?
(ii) 10% lower?
g. At the forecast sales volume, what will be the change in the net income if unit variable costs are 10% higher than expected and fixed costs are simultaneously 10% lower than expected?