Problem:
Freedom, Inc., management had formed cost studies and projected the following annual cost based on 40,000 units of production and sales:
total annual cost % of variable portion of total annual cost
direct material $400,000 100%
direct labor 360,000 75%
manufacturing overhead 300,000 40%
selling, general and administrative 200,000 25%
1. Compute freedom's unit selling price that will yield a projected 10% profit on sales if sales are 40,000 unit
2. Assume that management selects a selling price of $30 per unit. Compute freedom's dollar sales that will yield a projected 10% profit on sales assuming the above variable-fixed costs relationship are valid.