Oradell Company sells its single product at $60 per unit and incurs the followin

Question

Oradell Company sells its single product at $60 per unit and incurs the following costs per unit of product:

Direct material $16

Direct labor 12

Variable manufacturing overhead 7

Selling expenses 5

Ordell’s annual fixed cost is $880,000, and Oradell is subject to a 30% income tax rate

a)The production and sales volume of $4,000 units of product per month would result in an annual after tax income (loss) for Oradell Company of a. $80,000 b. $(800,000) c. $56,000 d. $(560,000)

b) The number of units of product that Oradell Company must sell annually to breakeven is a. 22,000 units b. 44,000 units c. 35,200 units d. 30,800 units

c) The annual sales revenue required by Oradell Company in order to achieve after-tax net income of $224,000 for the year is a. $3,600,000 b. $3,312,000 c. $1,656,000 d. $3,110,400

please how do i do this?

Explanation / Answer

Selling price = $60

Less: Variable Cost

Direct Material = $16

Direct Labour = $12

Variable Manu. O/h = $7

Selling Expenses = $5

Total Variable cost per unit = $40

Contribution Margin = $60 - $40 = $20

a.) C. $56,000

Production and Sales volume of 4000 units per month

Contribution margin of 4000 units = 4000 * 12 * $20 = $960,000

less: Fixed Cost = -$880,000

Profit = $80,000

Less: Income Tax @30% = -$24,000

Net income after Tax = $56,000

b.) b. 44,000 units

Break even = Total Fixed Cost / Variable Cost per unit

= 880000 / 20

= 44,000 units

c.) a. $3,600,000

Annual Sales revenue to achive $224,000 after tax income

before tax income = 224000 * 100 / 70 = $320,000

sales require = required Income + fixed cost / Variable cost per unit

= 320000 + 880000 / 20 = 60,000 units

Sales revenue = 60,000 * 60 = $3,600,000

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