Question

Please show work. Thanks

Group Problem 1 Ava Moreno is planning to sell a special kitchen knife for $15 per unit at a county fair. She purchases units from a local distributor for S6 each. She can return any unsold units for full credit. Fixed costs for the booth retail, setup and cleaning costs are $460. Assume an income tax rate of 30%. How many units must be sold to obtain the target net income of $560? Group Problem 2 The Kleespie Company had an after-tax net income of $150,000 in 2002. The income tax rate was 25%. Kleespie had a contribution margin of $900,000 and a contribution margin ratio of 60% Compute (1) operating income, (2) total fixed costs, (3) total sales, and (4) breakeven point in dollar sales.

Answer 1

1) Units to be sold to earn net income of $ 560/. Particulars Amount $ 560 240 800 Required net income Add: Tax expense (560*(30%/70%)) Income before tax Add: Fixed cost Required contribution 60% Add: Variable cost (1260*(40%/60%)) Sales revenue (A) Sales price per unit (B) No of units to be sold is (A/B) 460 1,260 840 2,100 15 140 Answer is 140 units 2) Operating Income :- Particulars Amount $ After tax net income Add: Income tax @25% (150000*(25%/75%)) 1,50,000 50,000 Operating Income Add: Fixed cost (900000-200000) Required contribution margin @60% Add: Variable cost (900000*(40%/60%)) Required sales revenue 2,00,000 7,00,000 9,00,000 6,00,000 15,00,000 Breakeven sales dollars is = (Fixed cost/Contribution margin %) Breakeven sales dollars is = (700000/60%) Breakeven sales dollars is = $ 1,166,6671. Operating Income is $ 200,000/- Total fixed cost is $ 700,000/- Total sales is $ 1,500,000/- Breakeven dollar sales is $ 1,166,667).