In: Accounting
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Kipmar Company produces a molded briefcase that is distributed to luggage stores. The following operating data for the current year has been accumulated for planning purposes. | ||||||
Sales price | $ 80.00 | |||||
Variable cost of goods sold | 24.00 | |||||
Variable selling expenses | 21.20 | |||||
Variable administrative expenses | 6.00 | |||||
Annual fixed expenses | ||||||
Overhead | $ 7,800,000 | |||||
Selling expenses | 1,550,000 | |||||
Administrative expenses | 3,250,000 | |||||
Kipmar can produce 1.5 million cases a year. The projected net income for the coming year is expected to be $1.8 million. Kipmar is subject to a 40% income tax rate. | ||||||
During the planning sessions, Kipmar’s managers have been reviewing costs and expenses. They estimate that the company’s variable cost of goods sold will increase 20% in the coming year and that fixed administrative expenses will increase by $150,000. All other costs and expenses are expected to remain the same. |
What price would Kipmar need to charge for the briefcase in the coming year to maintain the current year’s contribution margin ratio? |
What amount of sales revenue will Kipmar need to achieve in the coming year to earn the projected net income of $1.8 million? |