334 SUB: OVP Analysis and Marginal Analysis ‘Questions 17 and 18 ee based on the ‘nfomabon, Gruel Electrons Ca. s deve. _ odie ug aca hahafong cost intoration below rates Shep : 4 ait Costs Directmaterais $325 ‘Dretiobor A "Dawn Tpecongeny wl sob ating $20,001 pros Assets he age 0.00 ‘ cher poss be locales nw poe. 117, How many surge protactrs (rounded othe ‘earest hundred) ust Brol Electonics sel al selina price of §14 per unit to gain $30,000 addtional income before taxes? 10,700 unis 12,100 unis, 20,000 uns, 25,000 unis, pepe 18. How many surge protectors (rounded tothe ‘nearest hundred) mist Bruel Electronics sel ta ‘seling price of §14 per uni fo increase after ix ‘income by $30,000? Bruel Electrons’ effecive ‘income tax rata is 40% 10,700 units. 12,100 units, 20,000 unis 28,300 units. pom ‘Answer (D)iscomect. (CMA, TREQUIRED: The umber of unlts to be sold to generate & targeted pretax income. DISCUSSION: The number of units be sold to generate a ‘pected pre-tax income equals the sum of total fixed Gost and the targeted pre-tax. income, divided by the unt contuton Image Unt varie costs itl 8 (8325 + S400 + $79), and '5 $6 (514 unt seling ore ~ $8). Thus, the desired unit ‘sai iovel equals 25.000 nts ($120,000 + $30,000) = $8) “Answer (A) incorect. This number of units based on a LOW equal ta seling price. Answer (B's ncorect, A ‘ontibuion margin of $8 per unt necessitates sales of £26,000 unt o produce a $20,000 before-ax prot. Answer (C) isincorect. Ths number of uns i the breakeven pont ‘Answes(D}is correct. (CMA, adap) REQUIRED: ‘The qumber of units to be sold to generate & ‘pected after-tax income. DISCUSSION: ‘The number of units tobe sol to generate a ‘specified pre-tax income equals the sum f total xed costs and the taaeted ore‘ax income, divided bythe unt contribution margin Given a dosed afie-tax income of $30,000 ard a tax fate of 40%, tne targeted pretax income must bo $50,000, [530,000 + (1.0~-40)} Unit vara cots total $8 ($3.25 + $4.00 + $75), and UCM is $6 (614 unt selina price ~ $8), Hence, the desired unit sais level is 28 933 (120,000 + $29.00) + $0) Rounded to he rearest huncred, the answer's 2m 30, “Answer (A) ncortect, This numberof units is based on a {UCR equal to seing price and $20,000 of pretax income. ‘Answer (@) is incorect. A $6 UCM necessates sales of 28,300 unis to produce a $20,000 after-tax proft, Answer (C) is incorrect. This number of unis is the breakeven pon