Question

Data Table Variable cost (per bowl) Direct materials Direct manufacturing labor $ 3.75 7.50 1.35 12.60 Variable overhead (manufacturing, marketing, distribution and customer service) $ Total variable cost per bowl Fixed costs Manufacturing $ 18,000 166,800 Marketing, distribution, and customer service | $ 184,800 | Total fixed costs Selling price Expected sales, 21,500 units Income tax rate $ $ 28.00 602,000 40% Print [Done] Print Done

Answer 1

Answer with working notes is given below

1 After tax Operating Income Sales Less: Variable cost Contribution Less: Fixed Cost Profit before tax Less: Taxes at 40% Profit after taxes $602,000 $270,900|(21,600 X $12.60) $331,100 $184,800 $146,300 $58,520 $87,780 2 Break-even point in units Fixed Cost Contribution per unit 1 $15.40 Contribution per unit Selling price Variable cost Contribution per unit $28.00 $12.60 $15.40 Sales Less: Variable cost Contribution Less: Fixed Cost Profit before tax Less: Taxes at 40% Profit after taxes $672,000 (24,000 X $28) $302,400 (24,000 X $12.6) $369,600 $218,680 ($184,800+$33,880) $150,920 $60,368 $90,552 Break-even point in units Fixed Cost Contribution per unit $218,680 14,200 1 $15.40 Break even sales revenue $397,600 (14,200 X $28) Contribution per unit Selling price Variable cost Contribution per unit $28.00 $12.60 $15.40 5 Year 1 pre-tax profit Fixed Cost Total Target $146,300 $218,680 ($184,800+$33,880) $364,980 Sales units needed Total Target Contribution per unit $364,980 23,700 $15.40 Sales Revenue $663,600 (23,700 X $28) Checking above answer Sales Less: Variable cost Contribution Less: Fixed Cost Profit before tax Less: Taxes at 40% Profit after taxes $663,600 (23,700 x $28) $298,620 (23,700 x $12.6) $364,980 $218,680 $146,300 $58,520 $87,780 6 After tax Operating profit Pre-tax Operating profit $89,652 $149,420 ($89,652/(1-0.40) Contribution Less: Fixed Cost Less: Pre-tax Operating profit Max spend on advertising $369,600 24,000 X ($28-$12.6) $184,800 $149,420 $35,380