1) A company has variable costs of $24.50, total fixed costs of $20,500,000 and plans to...

1) A company has variable costs of $24.50, total fixed costs of $20,500,000 and plans to sell its product for $38.00. In 2018 it sold 2,200,000 units of product.

Required: a) breakeven in units and dollars; b) assume management wants to earn $14,000,000 in operating income, how many units must be sold; c) assume income tax rates are 22% of pre-tax income and management wants to earn $16,000,000 after tax- how many units are required; d) for 2018 what is the margin of safety in dollars and percentage; e) what is the operating leverage in 2018; f) the production manager wants to automate production and lower variable costs by $2 per unit and spend an additional $3,500,000 fixed costs per year- is this more profitable?

g) The sales manager wants to drop prices by $2 per unit and spend an added $250,000 on advertising, while volume increase by 160,000 units- is this more profitable?

Expert Solution

ekkarill92 answered 8 months ago

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