Susan Young, a part-time inventor, met Henry Jones, a Christmas ornament manufacturer, while golfing. Henry manufactures an ornament everyone loves, but stores will not carry because they are very fragile and often break during shipping. Susan told Henry about a plastic box she had developed that would protect such fragile items during shipping. After crash testing the plastic box, Henry offered Susan a contract to purchase 100,000 of the boxes for $2.50 each. Susan is convinced that the box has many applications and that she can obtain future orders. Production of the plastic boxes will take one year. Estimated costs for the first year are as follows:

Lease payments on building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900 per month

Lease payments on machine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,200 per month

Cost to retool machine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,000

Depreciation on machine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,600

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.70 per box

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.40 per box

Indirect materials and other manufacturing overhead . . . . . . . . . . . . . . . . . . .$0.20 per box

Interest on loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,500

Administrative salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$15,000

Required:

1. Using the information provided, determine Susan’s contribution margin and projected profit at a sales level of 100,000 boxes.

2. If Susan’s salary as an attorney is $50,000, determine how many boxes Susan must sell to earn profits equal to her salary.