# Accounting Unit 3

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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