Question

The company presents the following information related to sales and costs of the only type of product that will be sold abroad next year. Sale price $ 160, variable unit cost $ 130, fixed costs $ 249,000, the company is subject to a 38% tax rate.

a) What is the equilibrium point in units?

b) At what amount of sales ($) there will be no profits but losses?

c) When sales are 9,000 units, what is the amount of profit before taxes?

d) How many units does the company have to sell to make a profit before taxes of $ 100,000?

e) How many units does the company have to sell for a net profit (after taxes of $ 50,000?

f) Explain the results obtained.

Answer 1

Answer ;

A). Equilibrium pont

Formula = Fixed cost ÷contribution

= 249000÷30

Answer; =8300 Unit

Working note ; Contribution =Sales -Variable cost

C=160-130

C= 30

B) equilibrium point is $13,28,000/- , No profit but loss point is less than $13,28,000/-

it may be 13,00,000

C) Sales is 9000 unit the amount is 9000*160=$14,40,000/-

Less variable cost is 9000*130=$11,70,000/-

Less fixed cost is 2,49,000/-

=Profit before tax=21,000/-

D) calculation of number of unit sales

Number of unit sales = Fixed cost +Profit before tax ÷contribution per unit

NOUS ; 2,49,000+100,000÷30

Nous ; 3,49,000÷30

Nous ; 11633.33is 11,633 Unit

E) calculation of number of unit of sales profit after tax is 50,000/-

Number of unit = Fixed cost + Profit after tax(1-tax) ÷Contribution per unit

NOU = 249,000+(50000/1-.38) ÷30

NOU= 2,49,000+ 80,645÷30

NOU =329645÷30

NOU = 10988.16 is 10,988/- unit

E) Result are obtained following data sales of unit Minimum of 8500 otherwise loss may be bearings losses