Thermal Tent, Inc., is a newly organized manufacturing business that plans to ma

Question

Thermal Tent, Inc., is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per year of a new product. The following estimates have been made of the company's costs and expenses (other than income taxes):

What should the company establish as the sales price per unit if it sets a target of earning an operating income of $260,000 by producing and selling 50,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.)(Omit the "$" sign in your response.)

At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold.)

What will be the margin of safety (in dollars) if the company produces and sells 50,000 units at the sales price computed in part a? Using the margin of safety, compute operating income at 50,000 units.
(Omit the "$" sign in your response.)

Assume that the marketing manager thinks that the price of this product must be no higher than $94 to ensure market penetration. Will setting the sales price at $94 enable Thermal Tent to break even, given the plans to manufacture and sell 50,000 units?

Thermal Tent, Inc., is a newly organized manufacturing business that plans to manufacture and sell 50,000 units per year of a new product. The following estimates have been made of the company's costs and expenses (other than income taxes):

Explanation / Answer

budgeted units = 50,000 variable costs per unit = 47 + 32+4+ 1 =84$ fixed costs =340000+200000=540000$ so cost of production for 50000 units =4200000+540000=4740000$ targeted operated income=260000 so the selling price should be 4740000+260000=5000000$ so per unit selling price should be 5000000/50000=100$ per unit so answer for a part blank =100 break even point occurs at costs = selling price; assume X units were produced so total cost = 84X+540000=100X this gives X=33750 units answer for part b =33750 cost for 33750 units =540000+33750*84=3375000 margin of safety=5000000/3375000=1.48 so operating income for 50000units =1625000-1365000=260000 ans for c =260000 50000*94 =4700000$ = sales revenue cost for 50000 units =4740000 so there will be a deficit of 40000$ if we sell at 94$ answer is NO cheers :)

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