A certain company sells its only product for $10 per unit. The variable costs to produce...

A certain company sells its only product for $10 per unit. The variable costs to produce the product are $3 per unit and it costs approximately $1 per unit for selling and administrative costs. The fixed costs of production are $400,000 per period and the fixed selling and administrative costs are $200,000 per year. The company is subject to a 20 percent tax rate.

Answer the following questions.

What is the breakeven point in units?

What is the breakeven point in dollars?

How many units must be sold to earn a profit of $72,000 before tax?

How many units must be sold to earn a profit of $72,000 after tax?

If the variable costs increase 10 percent, what increase is necessary in selling price to maintain the same breakeven point in units?

If the fixed costs increase, what is the effect on breakeven? On contribution margin per unit? If the tax rate increases, what is the effect on breakeven? On contribution margin per unit?

Expert Solution

ekkarill92 answered 2 years ago

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