CalCorp produces pocket size calculators that are sold for $ 10 per unit. The costs associated...

CalCorp produces pocket size calculators that are sold for $ 10 per unit. The costs associated with each unit are as follows: Direct materials = $ 3.00, Direct labour = $ 0.25, Variable overhead = $ 2.00, and variable selling and administrative cost = $ 0.75. Total fixed costs are $ 100,000 for manufacturing activities and $ 20,000 for the selling and administrative functions. In a recent meeting, the board of directors asked the accounting function to perform a cost-volume-analysis and produce a break-even chart based on the current revenue and cost functions of the Company.

Required:

a. What is CalCorp’s current per-unit contribution ratio?

b. What are the Company’s break-even revenues?

c. What target revenues should be to earn net profits of $ 40,000?

d. What target revenues should be to earn a return on sales (i.e., net profits over revenues) of 20%?

Expert Solution

ekkarill92 answered 7 months ago

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