Ionic Charge is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per year of a new product. The following estiates have been made of the company's costs and expenses (other than income taxes):

Manufacturing costs: Fixed Variable per Unite

Manufacturing costs:

Direct Materials $40

Direct Labor 21

Manufacturing overhead $900,000 16

Period costs:

Selling expenses 3

Administrative Expenses $600,000

Totals $1,500,000 $80

a. What should the company establish as the sales price per unit if it sets a target operating income of $500,000 by producing and selling 50,000 units during the first year of operation? (Hint: First compute the required contribution margin per unit.)

b. At the unit sales price computer in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold.)

c. What will be the margin of safety in dollars if the company produces and sells 50,000 units at the sales price computed in part a?

d. Assume that the marketing manager thinks that the price of this product must be no higher that $100 to ensure market penetration. Will setting the sale price at $100 enable Ionic Charge to break even, given the plan to manufacture and sell 50,000 units?