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Assets= 36,000,000 liabilities 19,000,000 shareholders equity 17,000,000 unit sales forecast 1,500,000 average product sales price 75.00...

Assets= 36,000,000 liabilities 19,000,000 shareholders equity 17,000,000 unit sales forecast 1,500,000 average product sales price 75.00 unit costs of goods sold 55.00 fixed expenses (GSA) 12,500,000

Upsilon outsources it marketing operations to an exclusive sales agent that earns no salary but a 10% flat commission on all sales. The agent does not take a title to Upsilion's products. The agent's commission earning are reported as an operating expense on Upsilon's income state. Upsilon's operating consists only of the fixed op. expenses and the commissions paid to its marketing agent.

1. How many units of product must be sold for Upsilon to break even? And how much sales revenue would the break even level of units sales generate?

2. How many units of product sales and dollars of sales revenue are needed for Upsilon to achieve a 5% return on sales (i.e. before tax profit of margin)?

3. How many units of product sales and dollars of sales revenues are needed for Upsilon to earn a 25% return of equity?

4. Produce here an income statement showing all revenues, cost of sales, gross margin, operation expenses and before tax profit for the upcoming fiscal year.

5. Industry trade reports indicate the following DuPoint of Strategic Profit Model averages for the industrial sector in which Upsilon competes. Before tax profit margin 4% asset turnover 2.25 return of equity 18% Calculate Upsilon's five strategic profit model ratios and describe Upsilon's performance relative to the performance of an average firm inits sector?

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Forecast Units selling price Varaible costs costs of goods sold commission on sales 10% Total Variable Costs Contribution Margin 1,500,000 75.00 $112,500,000 55.00$82,500,000 7.50 $11,250,000 $62.50$93,750,000 $12.50$18,750,000 Fixed Cost Total Fixed Costs Net Income 12,500,000 12,500,000 6,250,000 1. How many units of product must be sold for Upsilon to break even? And how much sales revenue would the break even level of units sales generate? BEP sales in units -Fixed Cost/Contribution Margin per unit Fixed Cost Contribution Margin BEP units 12,500,000 $12.50 $1,000,000 Units selling price BEP sales in Dollars 75.00 75,000,000 2. How many units of product sales and dollars of sales revenue are needed for Upsilon to achieve a 5% return on sales (ie, before tax profit of margin)? Target Profits $75 x S x 5%-$3.755 Sales-Variable Costs Fixed Cost + Target Profit S12.50 S -12,500,000+3.75S 8.75S-12,500,000 1,428,571units Sales- Check Units S107,142,857 1,428,571 $ 75.00 $107,142,857 selling price Varaible costs costs of goods sold commission on sales 10% Total Variable Costs Contribution Margin Fixed Cost Total Fixed Costs Net Income Net Income as Percentage of Sales 55.00 78,571,429 $10,714,286 $62.50$89,285,714 7.50 $12.50$17,857.143 12,500,000 12,500,000 5,357,143 5.00%

3. How many units of product sales and dollars of sales revenues are needed for Upsilon to earn a 25% return of equity? Target Profit = 25% x 17,000,000 Sales Variable Cost Fixed Cost+Target Profit $12.50 S -12,500,000+4,250,000 $12.50 S S- Sales- Check Units selling price Varaible costs costs of goods sold commission on sales 10% | $ Total Variable Costs Contribution Margin 4,250,000 $ 16,750,00o 1,340,000 units $100,500,000 1,340,000 75.00 $100,500,000 55.00 $73,700,000 7.50 $10,050,000 $62.50 $83,750,000 $12.50$16,750,000 Fixed Cost Total Fixed Costs Net Income Net Income as Percentage of Sales 12,500,000 12,500,000 4,250,000 4.23% 4. Produce here an income statement showing all revenues, cost of sales, gross margin, operation expenses and before tax profit for the upcoming fiscal year. Revenue Cost of Sales Gross Margin operation expenses GSA commission on sales 10% Total Expenses before tax profit $112,500,000 $82,500,000 $30,000,000 12,500,000 $11,250,000 $23,750,000 $6,250,000

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