The Magneto Block Company produces sets of alphabet blocks. For one particular style, variable production costs are $1.50 and variable selling costs are $2.00. There are identifiable fixed production costs of $35,000 and fixed selling costs of $25,000. At a selling price of $10 per set, Magneto has been able to sell the entire 20,000 sets it can produce with available capacity.
1. What is the total cost (manufacturing & sales) per unit?
2. What is the quantity of sets of alphabet blocks that must be sold to break even?
3. What is the projected profit at 20,000 units? Prepare an income statement to prove your answer.