Question

Can you go through the word questions step by step please? I get the set up of schedule, but don't understand the word questions.

GIVEN: VC/UNIT CM % FC TAX RATE AFTER-TAX NI 35.75 35.00% 394,625 30% 199,430 REQUIRED PREPARE A COMPLETE INCOME STATEMENT REFLECTING THE ABOVE DATA PER UNIT TOTAL UNITS = 35,300 SALES VC CM 100.00% 65.00% 35.00% 55.00 35.75 19.25 FC 1,941,500 1,261,975 679,525 394,625 284,900 85.470 199,430 PT TAX 100.00% 30.00% 70.00% AT HOW MANY ADDITIONAL UNITS MUST BE SOLD FOR THE FOLLOWING PROPOSAL TO BREAK-EVEN? FIXED COSTS INCREASE VC/UNIT REDUCTION ANSWER 115,500 1.40 3,200 FIXED COSTS CHANGE = (CM/UNIT CHANGE X EXISTING UNITS) + (REVISED CM/UNIT X UNIT CHANGE) PER UNIT TOTAL UNITS = 38,500 SALES VC CM FC 100.00% 62.45% 37.55% 55.00 34.35 20.65 2,117,500 1,322,475 795,025 510,125 284,900 85,470 199,430 PT TAX 100.00% 30.00% 70.00% AT

Answer 1

Answer(1) Income Statement Per unit Units Sales 55 35.75 19.25 (55'35.300) (35.75*35,300) Variable cost Contribution Fixed cost Profit Tax@30% Profit after tax Total 35,300 1941500 1261975 679525 394,625 284,900 85470 199,430 (284,900*30%) working note: Contribution ratio Contribution ratio= 35% Contribution Sales Contribution- Sales - Variable cost 0.35 Sales - 35.75 Sales Let Selling price be x .35 x Sales - Variable cost Variable cost = X-0.35 x 35.75 = 0.65 x x= 35.75/0.65 55 Therefore Selling price is 55 Answer (2) Additional units to be sold in order to Break even Increased Fixed cost= 115,500 Revised Fixed cost 394,625 + 115,500 510125 Decrease in Variable cost 1.4 Revised Variable cost= 35.75 -1.4 34.35 Revised contribution- 55 - 34.35 20.65 Break even Quantity= Fixed cost Contribution per unit 510125