689 Words3 Pages

Question 1: Kolinchak, Inc., sells a product for $14 per unit. The variable cost per unit is $4.20. The fixed cost per year is $294,000. (4 points)
A. What is the contribution margin per unit?
$14 - $4.20 = $9.80
B. What is the contribution margin ratio?
$9.80/$14=0.7=70%
C. What is the breakeven point in units?
(SP x Q) – (VC x Q) – FC = P
$14Q-$4.20Q-$294,000=0
$9.8Q=$294,000
Q=30,000 units
D. What is the breakeven point in dollars?
Sales Dollars=FC/CM Ratio
$294,000/0.7=$420,000
Question 2: Calihan Company has a product contribution margin of $50. The fixed costs are $300,000. Calihan Company desires a target profit before taxes of $150,000 per year. (2 points)
A. How many units must be sold to achieve the target profit?
$50Q-$300,000=$150,000
$50Q=$450,000
Q=9,000 units
B. If fixed costs increase 5%, how many units must be sold to achieve the target profit?
$50Q-($300,000*1.05)=$150,000
$50Q-$315,000=$150,000
$50Q=$465,000
Q=9,300 units
Question 3: Ambert Apparel makes lightweight jackets. Each jacket sells for $17.50. The variable cost per jacket is $11.00. The fixed costs are $175,000. The after-tax target profit level is $25,000. Ambert Apparel is subject to a 30% income tax rate. (2 points)
A. To achieve the profit goal, what must the before-tax profit be?
$25,000/(1-0.3)=$35,714.29
B. How many units must be sold to achieve the profit goal after taxes?
$17.50Q-$11Q-$175,000=$25,000/(1-0.3)
$6.50Q-$175,000=$35,714.29
$6.50Q=$$210,714.29
Q=32,417.58; 32,418 units
Question 4: Chavez Co. produces and sells duffel bags that are priced at $60 each. Chavez has received a request for a special order for 500 duffel bags at a price of $48 each. The current unit cost to produce a bag is $32 (direct material, $20; direct labor, $8; and unit-related overhead, $4). Chavez Co. has the capacity to produce the special

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