units produced and sold

1200 1900

Direct material 36,000 57,000

Direct labor 18,000 28,500

rent 5,000 5,000

Depreciation 4,000 4,000

Electricity 4,400 5,800

other manufacturing 19,600 21,700

selling 8,000 8,000

sales commision 12,000 19,000

administrative 5,000 5,000

1.Assume the company prices its product at $100.What would be the contribution margin per unit?How many units would the company need to sell per month to break even? (Hint:There are two mixed costs:Electricity and Other Manufacturing.All other costs are either VC or FC.)

2. What price must the company set to achieve a monthly profit of $25,000?

3. The company is considering making a deluxe model.Its price would be $156, and its VC per unit would be $100, compared to a price of $100 and a VC of $60 for the basic model.It anticipates a sales mix of 60% basic model and 40% deluxe model.How many units of the basic model and how many units of the deluxe model must the company sell to achieve a monthly profit of $25,000?

4. Do you think that the business owners should switch to their new company on a full-time basis?Explain