Reference no: EM131928279

Problem

Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3.50 per unit. Enough capacity exists in the company's plant to produce 30,800 units of the toy each month. Variable expenses to manufactured and sell one unit would be $2.20, and fixed expenses associated with the toy would total $59,560 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 30,800 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $2,978 per month. Variable expenses in the rented factory would total $2.45 per unit, due to somewhat less efficient operations in the main plant. If the sales manager receives a bonus of 20 cents for each unit sold in excess of the break-even point, how many units must be sold each month to earn a return of 26% on the monthly investment in fixed expenses?