The Monteiro Manufacturing Corporation manufactures and sells folding umbrellas. The corporation’s condensed income statement for the year ended December 31, 2019, follows:  

Monteiro’s budget committee has estimated the following changes for 2020: 

1. 30% increase in number of units sold 
2. 20% increase in material cost per unit 
3. 15% increase in direct labor cost per unit
4. 10% increase in variable manufacturing cost per unit 
5. 5% increase in fixed manufacturing costs 
6. 6% increase in administrative expenses  

Required 

(a) Compute the unit sales price at which the Monteiro Manufacturing Corporation must sell its umbrellas in 2020 in order to earn a budgeted profit of $200,000. 

(b) Unhappy about the prospect of an increase in selling price, Monteiro’s sales manager wants to know how many units must be sold at the old price to earn the $200,000 budgeted profit. Compute the number of units that must be sold at the old price to earn $200,000. 

(c) Believing that the estimated increase in sales is overly optimistic, one of the company’s directors wants to know what annual profit is likely if the selling price determined in part a is adopted but the increase in sales volume is only 10%. Compute the budgeted profit in this case.

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Revenue (200,000 units). Variable costs Materials.... Direct labor... Variable manufacturing overhead. Variable selling costs Contribution margin Fixed costs.... Manufacturing. Selling..... Administrative Income... $300,000 200,000 60,000 40,000 $ 40,000 110,000 100,000 $1,000,000 600,000 $400,000 250,000 $150,000