Problem - III Cost-Volume-Profit (20 points) Temp Range Company prepared the fol

Question

Problem - III Cost-Volume-Profit (20 points) Temp Range Company prepared the following income statement for 2016: IBEX RANGE COMPANY Income Statement For the Year Ended December 31,2016 $200,000 75,000 125,000 83,200 $ 41,800 Sales (5,000 units). Variable expenses.. Contribution margin. Net Instructions Answer the following independent questions and show computations to support your answers. 1. What is the company's break-even point in units? 2. How many units would the company have had to sell to earn a target net income of $64,000 3. If the company expects a 25% increase in sales volume in 2017, what would be the expected 4. How much sales (in dollars) would the company have to generate in order to earn a target net in 2016? net income in 2017? income of $68,000 in 2017?

Explanation / Answer

ans 1 Break even in units 3328 units Fixed cost/CM per unit 83200/25 CM per unit 25 125000/5000 ans 2 Sales=(fixed cost+target net income)/CM per unit (83200+64000)/25 5888 ans 3 Contribution margin (5000*125%*25) 156250 Less: Fixed cost 83200 Net Income 73050 ans 4 Sales=(fixed cost+target net income)/CM ratio $ (83200+68000)/.625 241920 ans CM ratio 0.625 125000/200000

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