Question

Carumba Inc.’s 2012 budget includes the following items:
Sales ............ 80,000 units
Production ......... 80,000 units
Direct materials used ....... $600,000
Direct labour ........ 400,000
Variable overhead ...... 720,000
Fixed overhead ...... 400,000
Variable selling costs ...... 260,000
Fixed selling costs ...... 250,000
Administrative costs (all fixed) ... 150,000
The company’s tax rate is 30%.
REQUIRED
1. At what price would the company break even?
2. If the company were to sell only 60,000 units, what price would produce a before-tax profit of 20% of sales?
3. Majestix Inc. has offered to supply Carumba with 80,000 units at a price of $28/unit.
Should Carumba accept the offer? Explain.
4. What price would produce an after-tax profit of $350,000?


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  • CreatedJuly 31, 2015
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