eqaution sheets Note: Show all of your work to arrive at a final result. ) low n

Question

eqaution sheets

Note: Show all of your work to arrive at a final result. ) low nES (?aia: 1 A c )mpany is producing a pr )( uc hat has h( volume of sales per year 300,000 units selling price per unit $100 variable cost - $60 per unit fixed costs per year $600,000 book depreciation $400,000 tax depreciation $500,000 debt interest $100,000 tax rate-40% With the above data determine (a) Before-tax profit (b) After-tax profit (c) Break-even yearly volume of sales (d) Break-even selling price (e) Plot the break-even chart

Explanation / Answer

a) Sales (300000 * $100) =$30000000

less: variable cost (300000 * $60) =$18000000

Contribution margin =12000000

less: Total fixed cost [600000 + 400000] = $1000000

profit before interest and tax = 11000000

less:interest = 100000

profit before tax = 10900000

b profit before tax = 10900000

less: tax = 4360000

profit after tax = 6540000

c Break even sales in units = Total Fixed cost / contribution margin

= $1000000 / ($100 - $60)

= 25000 units

  

d. Break even selling price =    Total Fixed cost / total units + variable cost per unit

= $1000000 / 300000 + $60

= $63.33 per unit

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