Question
In: Accounting
Giro Inc. manufactures and sells bicycle safety helmets. Price and cost data for the product follows:...
Giro Inc. manufactures and sells bicycle safety helmets. Price and cost data for the product follows:
|
Selling price per unit |
$25.00 |
|
Variable costs per unit: |
|
|
Direct Materials |
10.50 |
|
Direct Labour |
5.00 |
|
Manufacturing overhead |
3.00 |
|
Selling expenses |
1.30 |
|
Total variable cost per unit |
$19.80 |
|
Annual total fixed costs: |
|
|
Manufacturing overhead |
$192,000 |
|
Selling and administrative |
276,000 |
|
Total fixed costs |
$468,000 |
|
Forecasted annual sales volume in units |
120,000 |
Required:
- Calculate Giro’s margin of safety in sales dollars.
- How many units does the company have to sell in order to generate a net income figure of $600,000? The company has a 35% tax rate.
- Giro is looking at the possibility of renting a machine at an annual cost of $90,000. This machine would allow Giro to reduce its direct labor costs by 15% and its variable manufacturing overhead costs by 5%. Advise Giro as to what the company should do.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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