Parkins Company produces and sells a single product. The company's income statement for the most recent month is given below: Sales (6,000 units at $40 per unit) $240,000 Less manufacturing costs: Direct materials $48,000 Direct labor (variable) 60,000 Variable factory overhead 12,000 Fixed factory overhead 30,000 150,000 Gross margin 90,000 Less selling and other expenses: Variable selling and other expenses 24,000 Fixed selling and other expenses 42,000 66,000 Net operating income $ 24,000 There are no beginning or ending inventories.
Required:
a. Compute the company's monthly break-even point in units of product.
b. What would the company's monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses?
c. What dollar sales must the company achieve in order to earn a net operating income of $50,000 per month?
d. The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break-even point in units