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Albright Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year:

Fixed Expenses Variable Expenses per unit sold

Production Costs: $2.30

Direct Materials $4.70

Direct Labor $3.00

Factory Overhead $225,000

Selling Expenses:

Sales salaries and commissions $97,000 $0.75

Advertising $47,500

Miscellaneous selling expense $16,200

General Expenses:

Office salaries $92,000

Supplies $12,300 $0.25

Miscellaneous general expenses $15,000

Total $505,000 $11.00

The selling price of single product is $16. In recent years, profits have fallen and management is now considering a number of alternatives. Albright wants to have a net income next year of $250,000, but expects to sell only 120,000 units unless some changes are made.

Requirement:

Compute the breakeven point.

The president of Albright has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Albrights contribution margin per unit, contribution margin ratio, and breakeven point for next year.

Based on Albrights current situation, will it earn its target net income? If not, how many units need to be sold to achieve the target?

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