Problem. Loudonville Persian Rug Company (LP) sells Persian rugs to the general public. Listed below is...
Problem. Loudonville Persian Rug Company (LP) sells Persian rugs to the general public. Listed below is information from their last year’s financial reports. LP’s maximum production capacity is 2,000 rugs per period. Calculate the figures requested below.
Round all intermediate calculations and final answers to the 2nd decimal place. Show ALL work for full and/or partial credit.
Variable Cost Per Unit
Version A $1,400
Version B $1,500
Units Sold This Period 900
Fixed Cost This Period $ 425,000
Price Per Unit $ 2,000
Tax Rate:
Version A 40%
Version b 20%
a) What is LP’s Breakeven Point in Sales $ and in Units? 20 points.
Sales $ $_________________________
Units __________________________ rugs
b. LP wants to achieve a Target Profit After Taxes of $60,000. How many units
must LP sell to achieve this goal? 30 points.
____________________________ units
c) LP learns that its Tax Rate has changed to 25%. How will this change affect the
following items? Will each item Increase, Decrease, or Remain the Same?
20 pts.
|
Increase, Decrease, or Remain the Same? |
||
|
A |
Contribution Margin Per Unit |
|
|
B |
Net Income After Tax |
|
|
C |
Breakeven Sales $ |
|
|
D |
Breakeven Units |
d. Refer to LP’s original data. Draw a Cost Volume Profit graph (ignoring taxes)
for the firm that includes and labels/identities the following ten items: 30 points.
Item
1-2 Breakeven Point with units and Sales $
3 Relevant Range
4 Total Sales Line
5 Total Cost Line
6-7 Labels for X and Y axes
8 Variable Cost Per Unit
9 Total Fixed Cost Per Period
10 Price Per Unit
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Problem. Loudonville Persian Rug Company (LP) sells
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