A company has a selling price of $20 a unit, variable costs of $10 a unit,...

A company has a selling price of $20 a unit, variable costs of $10 a unit, and fixed costs of $40,000.

A.What is the breakeven point in dollar sales?

B.What quantity must be sold to earn a profit of $60,000?

C.What is the Firm’s total contribution margin at breakeven?

D.How much revenue is needed to make an aftertax profit of $120,000? Assume a tax rate of 40%.

E.Assume the company sells 12,000 units and the total contribution margin increases by 10%, holding revenues constant, what is the income for the company?

F.Assume we have been selling 14,000 units. What is the net income if there is a 20% decrease in units sold?

G.By how much can fixed cost increase, if the firm increases its sales price by $4 and wants to make a profit of $40,000 by selling 9,000 units?

Solutions

Expert Solution

(A) Breakeven sales in units= Fixed Costs/ Contribution Margin per unit
contribution margin per unit=selling price-veriable cost
i.e20-10=10$
40,000/10=4,000units

Breakeven sales in Dollars= sales price per unit* Breakeven points in units
4,000units*20$=80,000$

(B)sales units to earn desired profit of 60,000$

Fixed Costs+Desired profit/ Contribution Margin per unit
40,000+60,000/10$=10,000units

(c)firms total contribution at Break even
AT Break even point Fixed cost=Contribution margin
so contribution margin=40,000$

(D)Revenue needed to earn after tax profit 1,20,000$
Tax rate 40%
so Before tax profit=1,20,000/1-40%=2,00,000$
Fixed Costs+Desired profit/ Contribution Margin per unit
40,000+2,00,000/10$=24,000units
sales in Dollers =24,000units*20$
=4,80,000$

(f)number of units sold decreases by 20%
present units sold=14,000
reduced units=14,000*20%=2,800units
so sales at praposed leveal=11,200units
Net income=contribution margin-fixed cost
contribution margin=11,200units*10$=1,11,200$
Fixed cost=40,000$
Net income=1,11,200-40,000
=72,000$

(g)increase in Fixed cost if selling price is 20+4=24$
so contribution margin=14$
sales units to earn desired profit of 60,000$

Fixed Costs+Desired profit/ Contribution Margin per unit
fixed cost+40,000/14=9,000units
Fixed cost=86,000$

so increase in fixed cost by 46,000$

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and...

Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. Product Selling Price per unit Variable Cost per unit Contribution Margin per unit X $1,248 $468 $780 Y 473 253 220 The sales mix for products X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y combined. Round answer to nearest whole number. units...

Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and...

20-Spice Inc.'s unit selling price is $54, unit variable costs are $33, fixed costs are $120,000,...

20-Spice Inc.'s unit selling price is $54, unit variable costs are $33, fixed costs are $120,000, and current sales are 9,300 units. How much will operating income change if sales increase by 5,500 units? 30 The contribution margin ratio is the a.same as the variable cost ratio b.portion of equity contributed by stockholders c.same as the profit-volume ratio d.same as profit

if fixed costs are $728,400, the unit selling price is $42, and the unit variable costs...

if fixed costs are $728,400, the unit selling price is $42, and the unit variable costs are $27, what is the break-even sales (units) if target profits are increased by $330,930? A) 26,498 B) 22,062 C) 48,560 D) 70,622 if the contribution margin ratio for 4 Zsons Company is 30%, sales were $843,000 and fixed costs were $113,295, what was the income from operations? A) 252,900 B) 139,605 C) 158,200 D) 377,650 Period Costs: A) are expensed as costs are...

If fixed costs are $247,000, the unit selling price is $116, and the unit variable costs...

If fixed costs are $247,000, the unit selling price is $116, and the unit variable costs are $73, what are the break-even sales in units (rounded to a whole number)?

19) If fixed costs are $274,000, the unit selling price is $124, and the unit variable...

19) If fixed costs are $274,000, the unit selling price is $124, and the unit variable costs are $79, the break-even sales (units) is a.3,468 units b.1,350 units c.6,089 units d.2,210 units 18) Strait Co. manufactures office furniture. During the most productive month of the year, 3,400 desks were manufactured at a total cost of $83,000. In the month of lowest production, the company made 1,140 desks at a cost of $64,400. Using the high-low method of cost estimation, total...

Product X is selling for $40/unit. Its variable costs are $20/unit. Fixed costs associated with this...

Product X is selling for $40/unit. Its variable costs are $20/unit. Fixed costs associated with this product are $300,000/year. The company expects to sell 250,000 of Product X a year. What is the current annual profit of Product X? What is the breakeven point in units for Product X? Suppose the company decides it wants to charge a 20% markup on cost. What would the target return price of Product X be? The company decides not to change the price...

In the Whine Company, it costs $30 per unit ($20 variable and $10 fixed) to make...

In the Whine Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product that normally sells for $55. A foreign wholesaler offers to buy 3000 units at $35 each. The Whine Company will incur special shipping costs of $2 per unit. Required: Assuming that the Whine Company has excess operating capacity, What is the impact on profit for the year if Whine Company accepts the special order? Show computations.. Do you agree with the decision...

The following are the selling price, variable costs, and contribution margin for one unit of each...

The following are the selling price, variable costs, and contribution margin for one unit of each of Banner Company’s three products: A, B, and C: Product A B C Selling price $ 140.00 $ 110.00 $ 130.00 Variable costs: Direct materials 85.00 34.00 75.00 Direct labour 17.50 28.00 14.00 Variable manufacturing overhead 2.50 4.00 2.00 Total variable cost 105.00 66.00 91.00 Contribution margin $ 35.00 $ 44.00 $ 39.00 Contribution margin ratio 25 % 40 % 30 % Due to...

The following are the selling price, variable costs, and contribution margin for one unit of each...

The following are the selling price, variable costs, and contribution margin for one unit of each of Banner Company’s three products: A, B, and C: Product A B C Selling price $ 70.00 $ 130.00 $ 180.00 Variable costs: Direct materials 30.50 51.00 114.00 Direct labour 12.00 32.00 24.00 Variable manufacturing overhead 3.00 8.00 6.00 Total variable cost 45.50 91.00 144.00 Contribution margin $ 24.50 $ 39.00 $ 36.00 Contribution margin ratio 35 % 30 % 20 % Due to...

Subjects