Answer
1.
Lets units sold = x
Contribution Margin = Sales – Variable cost
= ($36 * x) – ($30 * x)
Contribution Margin = 6x
Net income before tax = Contribution margin – Fixed Cost
Net income before tax = 6x – 153,000
Net Income after Tax = Net income before tax – 30%
= 6x – 153,000 – [30% * (6x – 153,000)]
= 6x – 153,000 – 1.8x + 45900
Net Income after Tax = 4.2x – 107,100
Profit = Net income after tax
35,700 = 4.2x – 107,100
4.2x = 142,800
X = 34,000 Hats
Adam must have sold 34,000 Hats last year.
2.
Margin of Safety = Actual Sales – BEP (In value)
BEP (In Value) = BEP (In Units) * Sales price per Hat
= 25,500 Hats * $36 per unit
BEP (In Value) = $918,000
Actual Sales = 34,000 * $36 per Hat
Actual Sales = $1,224,000
Margin of Safety = Actual Sales – BEP (In value)
= 1,224,000 - 918,000
Margin of Safety = $306,000
3.
Lets units to be sold = x
Contribution Margin = Sales – Variable cost
= ($36 * x) – ($30 * x)
Contribution Margin = 6x
Net income before tax = Contribution margin – Fixed Cost
Net income before tax = 6x – 153,000
Net Income after Tax = Net income before tax – 30%
= 6x – 153,000 – [30% * (6x – 153,000)]
= 6x – 153,000 – 1.8x + 45900
Net Income after Tax = 4.2x – 107,100
Profit = Net income after tax
64,260= 4.2x – 107,100
4.2x = 171,360
X = 40,800 Hats
Adam have to sell 40,800 Hats to earn $64,260 Profit.
4.
New Contribution margin per hat = $5 per hat ($36 - $31)
Fixed Cost = 153,000 (Will remain same)
New BEP = Fixed Cost / new Contribution per hat
= 153,000 / 5
New BEP = 30,600 Hats
5.
New Sale price |
37 |
Variable Cost |
31 |
Units (34,000 – 5%) |
32300 |
Sales |
1,195,100 |
Variable Cost |
1,001,300 |
Contribution Margin |
193,800 |
Fixed Cost |
153,000 |
Net profit before tax |
40,800 |
Tax @ 30% |
12,240 |
Net Profit after tax |
28,560 |
Problem 3-33 Adam Granger operates a kiosk in downtown Chicago, at which he sells one style...
Problem 3-33 Adam Granger operates a kiosk in downtown Chicago, at which he sells one style of baseball hat. He buys the hats from a supplier for $16 and sells them for $22. Adam's current breakeven point is 20,250 hats per year. Calculate contribution margin per unit. Contribution margin per unit $ LINK TO TEXT LINK TO TEXT LINK TO VIDEO What is Adam's current level of fixed costs? (Use the rounded contribution margin per unit calculated in the previous...
(LO 1, 2, 3) Breakeven; target income; CVP analysis Adam Granger operates a kiosk in downtown Chicago, at which he sells one style of baseball hat. He buys the hats from a supplier for $14 and sells them for $20. Adam’s current breakeven point is 15,000 hats per year. Required What is Adam’s current level of fixed costs? Assume that Adam’s fixed costs, variable costs, and sales price were the same last year, when he made $21,000 in net income....
XLS 3-33 Breakeven; target income; CVP analysis (LO 1, 2, 3) Adam Granger oper- ates a kiosk in downtown Chicago, at which he sells one style of baseball hat. He buys the hats from a supplier for $14 and sells them for $20. Adam's current breakeven point is 15,000 hats per year. Required a. What is Adam's current level of fixed costs? b. Assume that Adam's fixed costs, variable costs, and sales price were the same last year, when he...
Assume that Matthew’s fixed costs, variable costs, and sales price were the same last year, when he made $51,660 in net income. How many hats did Matthew sell last year, assuming a 30% income tax rate? + Chapter 03 Graded Assignment Question 3 of 5 5.71 / 20 Matthew Young operates a kiosk in downtown Chicago, at which he sells one style of baseball hat. He buys the hats from a supplier for $35 and sells them for $41. Matthew's...
. If Bubba’s sells 52,000 hats, what is its margin of safety (MOS) in dollars and MOS ratio? 4. Bubba is considering the elimination of sales commissions completely and increasing salaries by $357,000 annually. What would be the new breakeven point in units? What would be the before-tax income or loss if 39,000 hats are sold with the new salary plan? rev: 02_10_2020_QC_CS-200042 Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba’s carries numerous styles of...
Exercise 3.27 Stellar produces one single product, a small reading tablet, and sells it at $130 per unit. Its current annual sales are $312,000. Its annual fixed costs include factory rent, 562,400; depreciation expense: equipment, $15,600; utilities, $31,200; insurance, $12,480. Its variable costs include materials, $39 per unit, and direct labour, $52 per unit. Stellar's income tax rate is 20%. What is the contribution margin per unit? Contribution margin per unit LINK TO TEXT LINK TO TEXT LINK TO TEXT...
Exercise 3.27 Novak produces one single product, a small reading tablet, and sells it at $90 per unit. Its current annual sales are $162,000. Its annual fixed costs include factory rent, $30,780; depreciation expense; equipment, $8,100; utilities, $16,200; insurance, $6,480. Its variable costs include materials, $27 per unit, and direct labour, $36 per unit. Novak's income tax rate is 20%. What is the contribution margin per unit? Contribution margin per unit s LINK TO TEXT LINK TO TEXT LINK TO...
What are the correct answers for the ones I got wrong?? Exercise 3.27 Stellar produces one single product, a small reading tablet, and sells it at $130 per unit. Its current annual sales are $312,000. Its annual fixed costs include factory rent, 562,400; depreciation expense; equipment, $15,600; utilities, $31,200; insurance, $12,480. Its variable costs include materials, $39 per unit, and direct labour, $52 per unit. Stellar's income tax rate is 20%. Your answer is correct. What is the contribution margin...
Problem 4-3 Shamrock Audio produces a high-end DVD player that sells for $1,200. Total operating expenses for the past 12 months are as follows: Units Produced and Sold Cost August 164 $141,653 September 131 116,505 October 149 130,852 November 145 126,886 December 155 135,009 January 171 143,225 February 140 123,748 March 149 130,929 April 145 126,259 May 151 128,811 June 141 123,261 July 136 119,311 Use the high-low method to estimate fixed and variable costs. Estimated fixed cost $ Estimated...
Problem 9-37 CVP Analysis; Strategy [LO 9-1, 9-2, 9-3] Bubba’s Western Wear is a western hat retailer in Lubbock, Texas. Although Bubba’s carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth at Bubba’s has been great. The business is very...