[Karatistka]

Grissom & Sidel, Inc. makers of high-quality flashlights, has experienced steady growth over the last six years. However, increased competition has led the company to believe that an aggressive campaign is needed next year to maintain the company's growth. The company's accountant has presented management with the following data for the 2010, for use in preparing next year's campaign.

Cost schedules

Variable Costs
Direct labor per flashlight $8.00
Direct materials 4.00
Variable overhead 3.00
Variable costs per flashlight 15.00

Fixed Cost
Manufacturing 25,000
Selling 40,000
Administrative 70,000
Total Fixed Cost 135,000
Selling price per flashlight $25.00
Expected sales, 2010 (20,000 Flashlights) $500,000






Grissom & Sidel has set the sales target for the year 2011 at the level of $550,000 (22,000 flashlights).

Instructions:
a. What is the projected operating income for 2010?
b. What is the contribution margin per unit in 2010?
c. What is the break-even point in units for 2010?
d. If fixed costs increase by $10,000 what will be the break-even point in dollar sales for 2010?

[smoothy]

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