Question

can you answere question 2?

1. Goff Corporation sells products for $75 each that have variable costs of $50 per unit. Goff's fixed cost is $350,000. Calculate the contribution margin per unit, then use the per unit contribution margin approach to find the break-even point in units and dollars. 2. Phillips Company can sell 15,000 units of its new product at a selling price of $116. The unit cost is $72. The company's target profit is 40% of sales. The Vice President of Marketing has learned that a competitor plans to introduce a similar product for $104. TIL Vice President has recommended that Phillips match the competitor's price. She believes the lower selling price will increase sales volume by 20% Required: 1) Compute the company's net income assuming the product is sold for $116 and the costs remain at $72. Assume there were no additional costs. 2) Compute the product's target cost if it is sold at a $116 selling price. 3) Compute the company's net income if the target cost computed in Requirement 2 is achieved. 4) Compute the change in income from Requirement 1 if the product is sold for $104, costs remain at $72, and volume is increased by 20%.

Answer 1

2.

1)

Sales Revenue	$      1,740,000	=15000*116
Variable Costs	$      1,080,000	=15000*72
Net Income	$          660,000

2) Target profit = $116 x 40% = $46.40
Target cost = $116 - $46.40 = $69.60

3)

Sales Revenue	$      1,740,000	=15000*116
Variable Costs	$      1,044,000	=15000*69.60
Net Income	$          696,000

4) Revised sales volume = 15000 x 1.2 = 18000 units

Sales Revenue	$      1,872,000	=18000*104
Variable Costs	$      1,296,000	=18000*72
Net Income	$          576,000