7 Silverquick sel do they have to sell to achieve the target Is a single product
ID: 2562841 • Letter: 7
Question
7 Silverquick sel do they have to sell to achieve the target Is a single product. How many units of the product profit? Target profit Price Variable xpense ratio Annual fixed expenses 25% of sales revenue 20 55% s 240,000 A. B. 20,000 units 26,667 units 60,000 units 21,818 units E. None of the abovo. D. 8 A company produces a product for sale $12. Th would be at $24 per unit. Total fixed costs are $48,000 and variable costs per unit are e number of units to be produccd and sold to obtain a $14,400 nct income when the income tax rate is 25% A. B. C. D. 1,000 7,500 3,000 3,750 5,600 equal to 25% of its current actual sales. Given For the current period, Kelly Corporation has a margin of safety the following information, determine the actual Net Income for the current period 9 Break-even Sales Variable Cost Ratio s 300,000 45% Actual Net Income for the current period would be closest to A. S B. C. S D. $ E. 55,000 S 495,000 45,000 210,000 None of the aboveExplanation / Answer
7. Target profit = 25% of sales revenue
Selling price = 20
Variable expense ratio = 55%
Annual fixed expenses = 240,000
(No of units sold * selling price) - (No of units sold * selling price * variable expense ratio) - fixed expenses = (No of units sold * selling price * 25%)
(No of units sold * 20) - (No of units sold * 20 * 55%) - 240,000 = (No of units sold * 20 * 25%)
20No of units sold - 11No of units sold - 240,000 = 5No of units sold
No of units sold = 60,000
The answer is C.
8. Selling price = 24
Fixed costs = 48,000
Variable costs = 12
Target net income = 14,400
Tax rate = 25%
Operating income = target net income / (1-tax rate)
= 14,400 / (1-0.25) = 19,200
Units sold to obtain desired income = (Operating income + fixed costs) / (selling price - variable costs)
= (19,200 + 48,000) / (24 - 12) = 5,600
The answer is E.
9. Break even sales = 300,000
Margin of safety = 25% of sales
Margin of safety = Sales - Break even sales
25%sales = Sales - 300,000
0.25sales = Sales - 300,000
Sales = 400,000
Variable cost ratio = 45%
Contribution margin ratio = 1 - variable cost ratio
Contribution margin ratio = 1 - 0.45 = 0.55
Break even sales = 300,000
Braek even sales = Fixed costs / contribution margin ratio
300,000 = Fixed xosts / 0.55
Fixed costs = 165,000
Net income = (Sales * contribution margin ratio) - fixed cots
Net income = (400,000 * 0.55) - 165,000
Net income = 55,000
The answer is A.
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