Question

In: Accounting

Ng Corporation produces and sells only one product; its selling price is $100 and its variable...

Ng Corporation produces and sells only one product; its selling price is $100 and its variable cost is $60 per unit. The company’s monthly fixed expense is $35,000.

Required:

1. Using the equation method, determine the unit sales that are required to earn a target profit before tax of $4,000.

2. Using the formula method, determine for the dollar sales that are required to earn a target profit before tax of $5,000.

3. Using the formula method, calculate the number of units that need to be sold to earn an after-tax income of $6,000, assuming a tax rate of 25%.

Solutions

Expert Solution

Answer- 1)- Using the equation method, the unit sales that are required to earn a target profit before tax of $4,000 = 975 units.

Using equation method:-

px = vx + FC + Profit

Where,
p= price per unit,
x = number of units,
v= variable cost per unit

FC = Total fixed cost.

Y= Target profit

At break-even point the profit is zero therefore the CVP formula is simplified to:

px = vx + FC

Solving the above equation for x which equals No. of sales units:-

Sales units to earn target profit - x=FC+Y/p-v

= ($35000+$4000)/($100 per unit-$60 per unit)

= $39000/$40 per unit

= 975 units         

2)- Using the formula method, the dollar sales that are required to earn a target profit before tax of $5,000=$100000

Explanation- Dollar sales to earn target profit = (Fixed costs+ Target profit)/Contribution margin ratio

= ($35000+$5000)/40%

= $100000

Contribution margin ratio = ($40 per unit/$100 per unit)*100

= 40%

Contribution margin per unit = Selling price per unit- variable cost per unit

= $100 per unit-$60 per unit

= $40 per unit

3)- Using the formula method, the number of units that need to be sold to earn an after-tax income of $6,000=1075 units.

= Fixed costs+ Pre tax profit)/Contribution margin per unit

= ($35000+$8000)/$40 per unit

= $43000/$40 per unit

= 1075 units

Where- Pre tax profit = $6000/75%

= $8000


Related Solutions

Norman Corporation produces and sells a single product. The unit selling price is $150 and variable...
Norman Corporation produces and sells a single product. The unit selling price is $150 and variable expense per unit is $42. Total fixed expenses are $421,200. Enter answers using whole dollar amounts, no commas or dollar signs or decimals. Determine the unit sales needed to earn a target profit of $21,600. ? Determine the dollar sales needed to earn a target profit of $54,000 ? Calculate the margin of safety in dollars for each target profit amount above ? If...
Jeanclaude Corporation produces and sells one product. The budgeted selling price per unit is $105.
Jeanclaude Corporation produces and sells one product. The budgeted selling price per unit is $105. Budgeted unit sales for July, August, September, and October are 7,400, 7,500, 13,800, and 15,300 units, respectively. All sales are on credit. Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month. The budgeted accounts receivable balance at the end of August is closest to: A) $525,000 B) S315,000 C) $472,500 D) $787,500
Corvi Corporation produces and sells one product. The budgeted selling price per unit is $126. Budgeted...
Corvi Corporation produces and sells one product. The budgeted selling price per unit is $126. Budgeted unit sales are shown below:   July August September October Budgeted unit sales 7,300 11,500 14,200 12,100   All sales are on credit with 40% collected in the month of the sale and 60% in the following month. The expected cash collections for August is closest to: Multiple Choice $551,880 $1,131,480 $919,800 $579,600
Frisch Corporation produces and sells a single product. Data concerning that product appear below: Selling price...
Frisch Corporation produces and sells a single product. Data concerning that product appear below: Selling price per unit $ 170 Variable expense per unit $ 80 Fixed expense per month $ 140,000 Required: Given the present situation, compute a. The break-even sales in units. b. The break-even sales in dollars. c. The sales in dollars that would be required to produce a net operating income of $100,000. (1 Mark) d. The margin of safety in dollars if the company’s actual...
Brihon Corporation produces and sells a single product. Data concerning that product appear below: Selling price...
Brihon Corporation produces and sells a single product. Data concerning that product appear below: Selling price per unit $500 Variable expense per unit $350 Fixed expenses $966,000 Required: (You must show your work.) a. How many units must Brihon sell to break even? (5 pts.) b. What is Brihon’s breakeven sales in dollars? (5 pts.) c. If Brihon had total sales of $4,500,000, what is the margin of safety in units _________________ and dollars _______________? (10 pts.) d. If Brihon...
Gauani Corporation produces and sells a single product. Data concerning that product appear below: Selling price...
Gauani Corporation produces and sells a single product. Data concerning that product appear below: Selling price per unit $150.00 Variable expense per unit $42.00 Fixed expense per month $421,200 Required: a. Assume the company's monthly target profit is $21,600. Determine the unit sales to attain that target profit. Show your work! b. Assume the company's monthly target profit is $54,000. Determine the dollar sales to attain that target profit. Show your work! Please provide process details.
Grainger Company produces only one product and sells that product for $100 per unit. Cost information...
Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is as follows: Direct Material $14 per Unit Direct Labor $24 per Unit Variable Overhead $4 per Unit Fixed Overhead $34,000 Selling expenses are $3 per unit and are all variable. Administrative expenses of $15,000 are all fixed. Grainger produced 5,000 units; sold 4,000; and had no beginning inventory. A. Compute net income under i. Absorption Costing ii. Variable Costing   ...
Zumpano inc. produces and sells a single product. The selling price of the product is $170.00...
Zumpano inc. produces and sells a single product. The selling price of the product is $170.00 per unit and its variable cost is $73.10 per unit. The fixed expenses is $125,001 per month The break-even in monthly dollar sales is closest to:
2. Liest Corporation produces and sells a single product whose selling price is $112.00 per unit...
2. Liest Corporation produces and sells a single product whose selling price is $112.00 per unit and whose variable expense is $58.00 per unit. The company's monthly fixed expense is $249,480.           Required:    Compute break even sales in units and in dollars for Liest (4 points). Break even in UNITS = _________________ Break even in Sales $ = _________________    b.    Compute how many units and dollars Liest will have to sell in order to make a target net...
1a. Lusk Corporation produces and sells 15,100 units of Product X each month. The selling price...
1a. Lusk Corporation produces and sells 15,100 units of Product X each month. The selling price of Product X is $21 per unit, and variable expenses are $15 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $72,000 of the $101,000 in fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the company’s overall net operating income would: 1b....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT