Denbury Hospitality Products, Inc. is a small-sized food product manufacturer based in the Rocky Mountain regions...

Denbury Hospitality Products, Inc. is a small-sized food product manufacturer based in the Rocky Mountain regions of the US mid-west. The company started operations in January 2005 and quickly gained a reputation for its highly popular designer cakes. The following information is taken from the company’s budget for 2021:

Sales (5,100 units) $897,600

Variable costs $714,000

Fixed costs $139,600

Required: 1. Determine the break-even point in units and dollars for 2021. 4 marks

2. What sales volume in dollars would be necessary to earn an after-tax net operating income of $80,800 if the income tax rate is 35 percent? 4 marks

3. What sales volume in units would be necessary to earn a profit before tax equal to 20 percent of sales? 4 marks

4. What effect would an increase of 16 percent in the selling price per unit have on the break-even point? 4 marks

5. Compute (a) the degree of operating leverage, and (b) the margin of safety in both dollar and percentage terms. 4 marks

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ekkarill92 answered 10 months ago

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