Question

Q3

Ibrahim Corporation manufactures product A.  Following is information for next year’s operations, based on an estimated volume of 40,000 units:

Expected revenues                                    $2,000,000

Unit costs:

Direct materials                                              $  7

Direct labor                                                       16

Variable overhead                                               6

Fixed manufacturing overhead                           3

Total                                                          $32

Other fixed costs:

Administration, marketing, etc.             $230,000

Income tax rate                                                    30%

a.   What is the breakeven point for next year?

b.   What is next year’s projected after-tax income?

c.   Chose a target after-tax income.  Estimate the number of units that must be sold to reach this target.

Answer 1

Answer: -

a. Break even Point	16667	units
b. Projected After tax income	$ 343,000.00
c. Desired Unit Sales	63333	units

please find the below table useful to compute the desired results: -