Question

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

STUDENT HAS ASKED TWO DIFFRENT QUESTION I.E. QUESTION NO 1 AND 2. AS PER HOMEWORKLIB POLICY I AM ANSWERING FIRST QUESTION. AMOUNT IN $ PARTICULARS SELLING PRICE PER UNIT VARIABLE COST PER UNIT CONTRIBUTION MARGINE PER UNIT 3 = (1-2) 25 BREAK EVEN POINT IN UNIT USING CONTRIBUTION MARGINE TOTAL FIXED COST = $ 350,000 CONTRIBUTION MARGINE PER UNIT = $ 25 BREAK EVEN POINT IN UNIT = $350,000 / $ 25 = 14,000 UNITS BREAK EVEN POINT IN $ = 14,000 UNITS X $ 75 = $ 1,050,000