Company are as follows: Sales (100,000 units) $1,000,000 Costs fixed variable Ra

Question

Company are as follows: Sales (100,000 units) $1,000,000 Costs fixed variable Raw material $ 0 $300,000 Direct labor 0 200,000 Factory costs 100,000 150,000 Selling & Admin. 110,000 50,000 Total costs $210,000 $700,000 910,000 Operating income $90,000 Required: 1.Based on the preceding data, calculate break-even sales in units. 2.If Bidwell Company is subject to an effective income tax rate of 40 percent, calculate the number of units company would have to sell to earn an after-tax profit of $90,000. 3.If fixed costs increase $31,500 with no other cost or revenue factors changing, calculate the break-even sales in units.

Explanation / Answer

Company are as follows: Sales (100,000 units) $1,000,000 Costs fixed variable Raw material $ 0 $300,000 Direct labor 0 200,000 Factory costs 100,000 150,000 Selling & Admin. 110,000 50,000 Total costs $210,000 $700,000 910,000 Operating income $90,000 Required:


Contribution Margin per car
=
Revenues per car
–
Variable Expenses per car
Contribution Margin per car
=
$24
–
$9

Contribution Margin per car
=
$15

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