Gadsden Company expects to incur the following cost to produce and sell 70,000 units of its product:
Variable manufacturing cost ................................................ $210,000
Fixed manufacturing cost ................................................... 80,000
Variable marketing expense ................................................ 105,000
Fixed marketing and administrative expenses ............................ 60,000
Required:
(1) What price does the company have to charge for the product in order just to break even if all 70,000 units produced are sold?
(2) If management decides on a price of $8 and has a profit objective of 10% of sales, what sales volume is required?
(3) The company plans to expand capacity next year to 100,000 units. The increased capacity will increase fixed manufacturing costs to $147,000. If the sales price of each unit of product remains at $8, how many units must the company sell to produce a profit of 15% of sales?