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In: Accounting

Drinkable Ltd produces and sells drinking bottles and operates in Nowra, Australia. The company is in...

Drinkable Ltd produces and sells drinking bottles and operates in Nowra, Australia. The company is in the process of analysing its production and non-production costs in order to make its plan for next year. The company has estimatedselling price of $60 with the following costs per unit:Direct materials $15.00; direct labour $8.18; Variable Manufacturing Overhead $1.92; Variable Selling expenses $4.90. Drinkable Ltd. also has annual expenses: Interest on loan $9 870; Depreciation of building $22 920; Advertising expense $40 840; and other expenses $4 970.

Required (show your working):

  1. Calculate the contribution margin ratio and the break-even sales in dollars.

  1. Compute the number of units that must be sold to earn a profit before tax of $90,000.

  1. If the company is only able to sell 6,500 units of products, how much should the selling price be to obtain a profit after tax of $87,300 with the tax rate of 25%?

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Expert Solution

ekkarill92 answered 2 years ago
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