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# Prob 7-34

## Current Year's Net Income

Current Year's Sales Volume
Sales price per DVD
Variable cost per unit purchase price
Handling cost per unit
Annual fixed costs

BEP =

= 220,000 units

## Net income = 220,000 x \$ 16

= 220,000 x \$ 4

= \$ 880,000 - \$600,000

3. Volume of sales to maintain same net income if selling price remains at \$16:

## Volume of sales dollars required:

Volume of sales dollars required = fixed expenses + target net profit/ contribution-margin ratio

## Volume of sales dollars required = 600,000 + 200,000

13 - 2

= 800,000 / 0.0625

= \$12,800,000

Prob 7-42
DATA INPUT

Units sold

Sales
Costs: Fixed Variable
Direct material \$ - \$300,000
Direct labor - 200,000
Total costs \$ 210,000 \$700,000
Budgeted operating income

Tax rate

SOLUTION

## (a) Unit contribution margin = sales - variable costs /

= \$1,000,000 - \$ 700,000 /
= \$ 3 per unit

## Break-even point (in units) = fixed costs / unit contribution margin

= \$ 210,000 / \$ 3
= 70,000 units

## (b) Contribution- margin ratio = contribution margin /

= \$1,000,000 - \$ 700,000 /
= 0.3

## Break-even point (in sales doll = fixed costs / contribution-margin ratio

= \$ 210,000 / 0.3
= \$ 700,000

2. Number of units of sales required to earn after-tax profit of \$90,000 if tax rate is 40%:

Number of units of sales required (fixed costs + (target after tax net income
to earn target after-tax net in = unit contribution margin

= \$ 210,000 + \$ 90,000 /
/ \$ 3

= \$ 360,000 / \$ 3
= 120,000 units

## Break-even point (in units) = \$ 210,000 + \$ 31,500 /

= 80,500 units

5. Number of units of sales required to earn after-tax profit of \$90,000 if tax rate is 50%:
Number of units of sales required (fixed costs + (target after-tax net income
to earn target after-tax net in = unit contribution margin

= \$ 210,000 + \$ 90,000 /
/ \$ 3

= \$ 390,000 / \$ 3
= 130,000 units
\$ 200,000
200,000
\$ 16
\$ 10
\$ 2
\$ 600,000

30%

150,000 units

- \$ 12 - \$600,000

- \$600,000

= \$280,000

oblem data)

= \$ 13

## fit/ contribution-margin ratio

/ (( 16 -
) / \$ 16 )

100,000

\$ 1,000,000
910,000
\$ 90,000

40%

units sold
100,000

sales revenue
\$ 1,000,000

(1-t))) /

60%

\$ 3
(1-t))) /

0.50
Case 7-55 1 \$500,000
2 \$1,000,000
3 \$13,333,333
4 \$1,250,000

## Case 7-54 1a 500 units

1b 2500 units
2 Profit under Alternative 1 241200
Profit under Alternative 2 239400
Profit under Alternative 3 204000

16,00,000
2 19,692,308
3 19,200,000

## prob 7-51 1 0.34

2 13000 units
3 decrease by 2.97\$
4 10729 units
5 11000 units or 5500 units each

## Prob7-50 1 1100 tons

2 \$225,000
3 drop this question
4 307.5 tons
5 1224 tons or \$612000
6 1140000

## Prob 7-47 2 17000 units

3 27000 units
4 BE higher 17000 instead of 15000
Sales required to earn target profit lower 27000 instead of 29000 units

R 27500
S 40816
3 37500 tubs

## Prob 743 and 7-44 Excel sheet already mailed

Prob 7-42 1 70000 or \$700000 Refer Full solution sheet
2 120000 units
3 80500 units

Try all problems from 7-34, selected solution given next to the question in the textbook