Eagle Company makes the MusicFinder, a sophisticated satellite radio. Eagle has experienced a steady growth in sales for the past five years. However, Ms. Luray, Eagle's CEO, believes that to maintain the company's present growth will require an aggressive advertising campaign next year. To prepare for the campaign, the company's accountant, Mr. Bednarik, has prepared and presented to Ms. Luray the following data for the current year, Year 1:
Variable costs:
Direct labor (per unit) $ 100.00
Direct materials (per unit) 45.00
Variable overhead (per unit) 20.00
Total variable costs (per unit) $ 165.00
Fixed costs (annual):
Manufacturing $ 400,000
Selling 300,000
Administrative 800,000
Total fixed costs (annual) $ 1,500,000
Selling price (per unit) 400.00
Expected sales revenues, Year 1 (25,000 units) $ 10,000,000
Eagle has an income tax rate of 35 percent.
What is the break-even point in units for Year 1?