24. During 2014, Teko Inc. reported revenues of $925,400 and profits of $88,500.
ID: 2718798 • Letter: 2
Question
24.
During 2014, Teko Inc. reported revenues of $925,400 and profits of $88,500. Fixed costs were $456,250 and 37,016 units were sold. If costs and prices are expected to stay the same in 2015, and Teko expects to sell 40,000 units, what will be the company’s budgeted profit?
A)
$95,457
B)
$132,414
C)
$525,000
D)
$667,957
22.
The Synergy Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge?
A)
$13.50
B)
$14.55
C)
$12.75
D)
$10.95
24.
During 2014, Teko Inc. reported revenues of $925,400 and profits of $88,500. Fixed costs were $456,250 and 37,016 units were sold. If costs and prices are expected to stay the same in 2015, and Teko expects to sell 40,000 units, what will be the company’s budgeted profit?
A)
$95,457
B)
$132,414
C)
$525,000
D)
$667,957
22.
The Synergy Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge?
A)
$13.50
B)
$14.55
C)
$12.75
D)
$10.95
Explanation / Answer
1. B is the correct option.
The profit volume ratio (contribution/sales) = 58.86%
The selling price per unit is $ 25. If 40,000 units are sold next year, total revenues would be $ 1000,000. Applying the P/V Ratio, we get contibution of $ 588, 600 approx. Deducting fixed cost of $ 456,250 therefrom, we get profit of $132, 350 approx which is closes to answer in option B.
2. C should be the correct option. The unit selling price should be $12.75, so that the total revenues do not fall below $ 1000,000, assuming that the variable cost per unit and total fixed expenses remain unchanged.
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