Question

E3-28 (similar to) Just for marating costs a $150.000 who the country w es com of goods e has a sing price of the company has an incom the whole 15 ww e of 20% The company has and mancingo of 730.000 and Requirements 1. How many m or e to break even? 2. How many ans must the company well in order to reach . a target operating income of $400.000 b ant income of $400,000 1. How manyjeans would just for kids have to l earn the raincome requirement i Consider each requirement independent) the contribution margin perunt increases by 12% the ling price is increased to $23.00 the company torces manufacturing to an overseas company increasing copernit by $100 and savings of Print Done

Answer 1

REQIREMENT 1 FIXED COSTS 880000 CONTRIBUTION PER UNIT 4 ANSWER BREAKEVEN NUMBER OF UNITS 220000 ANSWER

REQUIREMENT 2 A TARGET OPERATING INCOME 400000 FIXED COST 880000 ALREADY GIVEN CONTRIBUTION PER UNIT TOTAL UNITS TO SELL TO EARN TARGET OPERATING INCOME 320000 TARGET NET INCOME(AFTER TAX) 400000 80% INCOME TAX RATE 100000 20% TOTAL OPERATING INCOME 500000 FIXED COST 880000 TOTAL 1380000 CONTRIBUTION PER UNIT UNITS TO PRODUCE TO ACHIEVE THE TARGET NET INCOME 345000

REQUIREMENT 3 CONTRIBUTION REVISED CONTRIBUTION 4.48 TOTAL (AS ALREADY MENTIONED) 1380000 UNITS TO PRODUCE TO ACHIEVE THE TARGET NET INCOME 308036| LESS: SELLING PRICE SALES COMMISSION VARIABLE EXPENSES 1.15 CONTRIBUTION 6.85 TOTAL (AS ALREADY MENTIONED) 13800001 UNITS TO PRODUCE TO ACHIEVE THE TARGET NET INCOME 201460 SALES PRICE LESS: SALES COMMISSIONS VARIABLE COST CONTRIBUTION OPERATING INCOME (TARGETED) 500000 FIXED COSTS 515000 TOTAL 1015000 UNITS TO PRODUCE TO ACHIEVE THE TARGET NET INCOME 338333