In: Accounting
Net Income Planning Superior Corporation sells a single product for $60 per unit, of which $36 is contribution margin. Fixed costs total $72,000 and net income before income tax is $28,800.
Determine the following
a The present sales volume in dollars. $ Answer
b. The break-even point in units. Answer
units
c. The sales volume in units necessary to attain a net income
before income tax of $39,600. Answer
units
d. The sales volume in units necessary to attain a net income
before income tax equal to 20% of sales revenue. Answer
units
e. The sales volume in units necessary to attain an after-tax net
income of $43,200 if the tax rate is 40%. Answer
units
A |
Sale price per units |
$60 |
B |
Contribution margin per unit |
$36 |
C = (B/A) x 100 |
Contribution margin ratio |
60% |
D = A - B |
Variable cost per unit |
$24 |
A |
Fixed Cost |
$72,000 |
B |
Net Income before Income tax |
$28,800 |
C = A+B |
Total Contribution margin |
$100,800 |
D |
Contribution margin ratio |
60% |
E = C/D |
Present Sales Volume in $ |
$168,000 |
A |
Fixed Cost |
$72,000 |
B |
Contribution margin per unit |
$36 |
C = A/B |
Break even point in units |
2,000 |
A |
Target Net Income |
$39,600 |
B |
Fixed Cost |
$72,000 |
C = A+B |
Total contribution margin required to earn target income |
$111,600 |
D |
Contribution margin per unit |
$36 |
E = C/D |
Sales volume in units neccesary |
3,100 |
Let Total Sales $ be ‘$ X’, then
A |
Target Net Income |
0.2X |
B |
Fixed Cost |
$72,000 |
C = A+B |
Total contribution margin required to earn target income |
0.2X + 72000 |
D |
Contribution margin ratio |
60% |
E = C x Sales $ |
Contribution Margin |
0.6X |
Equation: |
0.6X = 0.2X + 72000 |
|
0.6X - 0.2X = 72000 |
||
0.4X = 72000 |
||
X = 72000 / 0.4 |
||
X = 180000 |
||
F |
Sales Dollar |
$180,000 |
G |
Sale price per unit |
$60 |
H = F/G |
No. of units required to earn target income |
3,000 |
A |
After Tax Net Income |
$43,200 |
B |
Tax rate |
40% |
C = A/60% |
Before Tax Net Income |
$72,000 |
D |
Fixed Cost |
$72,000 |
E = C+D |
Total contribution margin required to earn target income |
$144,000 |
F |
Contribution margin per unit |
$36 |
G = E/F |
Sales volume in units |
4,000 |