Question

Cost-volume-profit analysis is used to analyze the relationship between revenues, variable costs, fixed costs, profits, and units produced.
Required:
For each of the following situations, calculate the missing items.
(a) Acme, Inc. sells its product for $45. The variable cost per unit is $24, and fixed costs are $1,672,500. What profit will Acme make if 225,000 units are produced and sold?
(b) Beta Co. can sell 140,000 units in one year. Variable costs are $130 per unit, and fixed costs are $4,040,000. How much should Beta sell its product for per unit if the company wants to make a pretax profit of $2,260,000?
(c) Capitol Enterprises sells 85,400 units in one year. The product has a contribution margin of $44, and fixed costs are $1,907,600. What is Capitol Enterprises’ pretax profit?
(d) Denson, Inc. sells its product for $135. The product has a variable cost of $105 and fixed costs of $36,000,000. How many units should the company sell if it wants to earn pretax profits of $27,000,000?
(e) Edgar Co. has a tax rate of 35 percent. The company sells a product with an $18.50 contribution margin; fixed costs of $9,000,000 are incurred by the company annually. How many units should the company sell if it wants to earn after-tax profits of $3,325,000?


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  • CreatedMarch 27, 2015
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