Question - Delphi Company has developed a new product that will be marketed for the first time next year. The product will have variable costs of $32 per unit. Although the marketing department estimates that 49,000 units could be sold at $52 per unit, Delphi's management has allocated only enough manufacturing capacity to produce a maximum of 35,000 units a year. The fixed costs associated with the new product are budgeted at $630,000 for the year. Delphi is subject to a 40% tax rate.
1- Calculate contribution margin per unit.
2- How many units of the new product must Delphi sell in the next fiscal year to break even?
3- What is the maximum net income that Delphi can earn from sales of the new product in the next fiscal year?
4- Delphi's managers have stipulated that they will not authorize production beyond the next fiscal year unless the after-tax profit from the new product is at least $105,000. How many units of the new product must be sold in the next fiscal year to ensure continued production? (Please show work).