1. T-Tunes, Inc. is considering the introduction of a new music player
with the following price and cost characteristics:
Sales price per unit: $120
Variable cost per unit: $60
Annual fixed costs:
(a) How many units must T-Tunes sell to break even?
(b) How many units must T-Tunes sell to make an operating profit of
$240,000 for the year?
(c) What will the operating profit be, assuming that the projected sales
for the year are 8,000 units?
Consider requirements (b) and (c) independent of each other.

2. Kramer Company has decided to use a predetermined rate to assign factory overhead to
production. The following predictions have been made for 2010:
Total factory overhead costs
Direct labor hours
Direct labor costs
Machine hours

50,000 hours
60,000 hours

Compute the predetermined factory overhead rate under three different bases: (1) direct labor
hours, (2) direct labor costs, and (3) machine hours.