Question

In: Accounting

Hayes Company operated at normal capacity during the current year, producing 54039 units of its single...

Hayes Company operated at normal capacity during the current year, producing 54039 units of its single product. Sales totalled 27015 units at an average price of $21.50 per unit. Variable manufacturing costs were $10.69 per unit, and variable marketing costs were $8.70 per unit sold. Fixed costs were incurred uniformly throughout the year and amounted to $155315 for manufacturing and $59742 for marketing.

What is Hayes break-even point in units for the current year?

Select one:

a. 19894

b. 73609

c. 101923

d. 27015

The following data is for the Jobim Company, a manufacturer of ball-point pens:

Income tax rate

39%

Selling price per unit

$3.09

Variable cost per unit

$1.96

Total fixed costs

$121033


How many units must Jobim sell to earn an after-tax income of $32286?

Select one:

a. 135681

b. 107109

c. 180370

d. 153948

Solutions

Expert Solution

Solution-1 : Break-even point:

Contribution for one product = Sales Price – Variable cost

(It is to be noticed that Variable manufacturing costs and variable marketing costs are part of variable cost)

= Sales Price – Variable manufacturing cost – variable marketing costs

= $21.5 - $10.69 - $8.70

= $2.11

Hence Contribution per product is $2.11

Total Fixed cost = Fixed Manufacturing cost + Fixed Marketing cost

= $155,315 + $59,742

= $215,057

Hence Fixed cost is $215,057.

Breakeven units = Fixed cost / Contribution per unit

= $215,067 / $2.11

= 101923 units (rounded to next number)

Hence Hayes Company must sell a total of 101,923 units in order to reach at break-even point.

Solution is part c

Solution 2-

For Jobim Company, Let’s assume X as before tax income.

Before tax income = X

Income tax rate = 39%

After tax income = (100% - 39%) X = 0.61X

After-tax income = $32286

0.61 X = $32286

X = $52,928 (rounded off to next number)

So, Jobim Company must have profit of $52,928 to reach at after-tax desired income.

Contribution for Jobim Company = Sales Price – variable cost

= $3.09 - $1.96

= $1.13

Fixed cost= $121,033

Number of units to earn a profit of $52,928 = (Fixed Cost + Desired Profit) / Contribution per unit

= (121,033 + 52,928) / 1.13

= 153,948 units (rounded off to next number)

Solution is part d.

ekkarill92 answered 2 years ago
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