Question

Required full Answer for Q4 and Q5

$1 Jason Timberwolf owns and operates Timberwolf Industries, a firm that makes very cheap, discounted bowling balls. Here's the essential information on this production operation, and keep in mind that when we use the term "unit" we're referring to each bowling ball produced by Timberwolf: Sale price per unit $10 Variable costs per unit: Direct Materials Direct Labor Variable portion of Mfg OH $3 Total variable cost per unit $6 Q#4: Using the data provided earlier for the unit sale price and unit variable costs: a) If the operation's total fixed costs are $1 million annually, how many units will the company need to sell each year in order to break even? How much in annual sales dollars (sales revenue) will the company need to sell in order to break even? b) If the operation's total fixed costs are $2 million annually, how many units will the company need to sell each year in order to break even? How much in annual sales dollars (sales revenue) will the company need to sell in order to break even? c) Continuing from the breakeven result in Part (b) above, if the company's sales staff anticipate that during the upcoming year the firm will be able to sell 700,000 bowling balls, calculate the margin of safety and express the answer in sales dollars and as a ratio. Q#5: Using the same data provided earlier for the unit sale price and unit variable costs. and also given that the company's annual total fixed costs are $1 million: a) How many units will the company need to sell in a year in order to make a profit of $5 million? b) How much in annual sales dollars (sales revenue) will the company need to sell in order to make a profit of $5 million

Need full Ansers for Q4 and Q5

Answer 1

4]
a]	Break even point in units = Total fixed costs/Contribution margin per unit = 1000000/(10-6) =	250000	Units
	BEP in dollars = Total fixed costs/Contribution margin ratio = 1000000/(4/10) =	$             25,00,000
b]	Break even point in units = Total fixed costs/Contribution margin per unit = 2000000/(10-6) =	500000	Units
	BEP in dollars = Total fixed costs/Contribution margin ratio = 2000000/(4/10) =	$             50,00,000
c]	Current sales = 700000*10 =	$             70,00,000
	MS in dollars = Current sales-Breakeven sales = 7000000-5000000 =	$             20,00,000
	MS ratio = MS in dollars/Current sales = 2000000/7000000 =	28.57%
5]	Units to make profit of 5000000 = (5000000+1000000)/4 =	1500000	Units
	Sales to make profit of 5000000 = (5000000+1000000)/(4/10) =	$         1,50,00,000