A 2002 Income Statement for Anthony Industries, using a contribution margin approach, is shown below. Anthony makes only one product. 50,000 units were sold in 2002.

Data 1

Revenues $650,000

Variable Costs:

Manufacturing costs $290,000

Selling costs 130,000

Total variable costs 420,000

Contribution margin $230,000

Fixed Costs:

Manufacturing costs $110,000

Administrative costs 70,000

Total fixed costs 180,000

Net Income (before taxes) $50,000

Requirements: 2 points each part

Answer the following questions. Assume each situation is independent.

a) Determine the break-even point in dollars.

b) Determine the number of units that must be sold to produce a before tax profit of $200,000 if the tax rate is 30%.

c) Determine the number of units that must be sold to produce an after tax profit of $200,000 if the tax rate is 30%.

d) Calculate the expected change in a companys net income if it undertakes an advertising program that costs $25,000 and increases sales $60,000.

e) Assume that the company is considering another product. They estimate that the product will have variable costs of $20 per unit and demand will be 25,000 units. The fixed costs of developing the product will be $165,000. What is the lowest price the company should charge for the potential product given this information?

f) What is the companys degree of operating leverage? What percentage will profits increase if unit sales increase 10%?