Ontario Outdoors is a manufacturer of outdoor items. The company is considering the possibility of offering a new sleeping bag that would sell for $150 each. Cost to manufacture these sleeping bags includes $40 in materials and $35 in direct labor for each sleeping bag. Variable marketing and selling costs would be $15 each. In order to manufacture these sleeping bags, the company would need to incur $120,000 in fixed costs for new equipment. Show your calculations
Required:
a. Compute the break-even point of the sleeping bag in units sold.
b. What would be the total revenue at the break even point?
c. How many units would Ontario need to sell to earn a profit of $21,000?
d. If fixed costs in fact are $150,000 rather than $120,000, how many units would need to be sold in order to earn $21,000?