Homework Answers
| Ques 1 | ||||||
| Fixed Cost | / | Contribution margin per unit | = | Breakeven in units | ||
| 1400000 | / | 7 | = | 200000 | ||
| Sales | 30 | |||||
| Sales commission | 3 | |||||
| Variable cost | 20 | |||||
| Contribution margin per unit | 7 | |||||
| Ques 2a | ||||||
| Fixed Cost | + | Target operating income | / | Contribution margin per unit | = | Quantity needs to be sold |
| 1400000 | + | 420000 | / | 7 | = | 260000 |
| Ques 2b | ||||||
| Fixed Cost | + | Target operating income | / | Contribution margin per unit | = | Quantity needs to be sold |
| 1400000 | + | 560000 | / | 7 | = | 280000 |
| Net Income | 420000 | |||||
| Divided by (1-Tax rate) | 0.75 | |||||
| Target operating income | 560000 | |||||
| Ques 3a | ||||||
| Fixed Cost | + | Target operating income | / | Contribution margin per unit | = | Quantity needs to be sold |
| 1400000 | + | 560000 | / | 8.05 | = | 243478 |
| Old contribution Margin | 7 | |||||
| Increase by | 15% | |||||
| New Contribution Margin | 8.05 | |||||
| Ques 3B | ||||||
| Fixed Cost | + | Target operating income | / | Contribution margin per unit | = | Quantity needs to be sold |
| 1400000 | + | 560000 | / | 8.8 | = | 222728 |
| Sales | 32 | |||||
| Sales commission | 3.2 | |||||
| Variable cost | 20 | |||||
| Contribution margin per unit | 8.8 | |||||
| Ques 3C | ||||||
| Fixed Cost | + | Target operating income | / | Contribution margin per unit | = | Quantity needs to be sold |
| 480000 | + | 560000 | / | 5 | = | 208000 |
| Sales | 30 | |||||
| Sales commission | 3 | |||||
| Variable cost | 22 | |||||
| Contribution margin per unit | 5 | |||||
| New Fixed Cost | ||||||
| Fixed Manufacturing Cost | 230000 | |||||
| Fixed Selling cost | 250000 | |||||
| New Fixed Cost | 480000 |
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