Question
In: Accounting
Norman Goods sells only two products, Product A and Product B. Product A Product B Total...
Norman Goods sells only two products, Product A and Product B.
|
Product A |
Product B |
Total |
|
|
Selling price |
$50 |
$80 |
|
|
Variable cost per unit |
$33 |
$48 |
|
|
Total fixed costs |
$550,000 |
Norman Goods sells three units of Product A for each two units it sells of Product B. Norman Goods has a tax rate of 20%.
Required:
a. What is the breakeven point in units for each product, assuming the sales mix is 3 units of Product A for each two units of Product B?
b. How many units of each product would be sold if Norman Goods desired an after-tax net income of $410,000, using its tax rate of 20%?
Hello , please i need the answer quickly
Solutions
Expert Solution
| Product A | Product B | ||||||
| Sales Price | 50.00 | 80.00 | |||||
| Less: Variable Cost | 33.00 | 48.00 | |||||
| Contribution Margin | 17.00 | 32.00 | |||||
| Product Mix in Units | 3 | 2 | |||||
| Product Mix % | 60.00% | 40.0% | |||||
| Weighted Average Contribution Margin | 10.20 | 12.80 | 23.00 | ||||
| (CM PU*Product Mix%) | |||||||
| A | Fixed Costs | 550000 | |||||
| Weighted Average Contribution Margin | 23.00 | ||||||
| Break Even Units | 23913.0435 | ||||||
| (Break Even Units * Product Mix %) | |||||||
| Product A | 14348 | ||||||
| Product B | 9565 | ||||||
| B | After Tax Income Desired | 410,000 | |||||
| Add: Tax Amount | 102,500 | ||||||
| Pre Tax Income Desired(410000/(100%-20%) | 512,500 | ||||||
| Add: Fixed Costs | 550,000 | ||||||
| Total Required Contribution Margin | 1,062,500 | ||||||
| Weighted Average Contribution Margin | 23.00 | ||||||
| Units to be Sold | 46,195.65 | ||||||
| (Units to be Sold * Product Mix %) | |||||||
| Product A | 27717 | ||||||
| Product B | 18478 | ||||||
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