In solving the exercises below, round all the dollar figures to TWO DECIMAL POINTS.

12-3

The Heavy Metal Corporation specializes in producing a range of iron cast heavy duty blocks.

The company will manufacture and sell 700,000 units next year.

Fixed costs will total $250,000 while variable costs will be 75% of the sales.

a. What selling price is necessary to achieve an EBIT of $500,000?

b. Set up a pro forma income statement to verify your solution to part (a).

c. What should be the price per unit to achieve an EBIT break-even?

d. Set up a pro forma income statement to verify your solution to part (c).