# Question: Cost volume pro t analysis is used to analyze the relationship between revenues

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?

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?

**View Solution:**## Answer to relevant Questions

Use the information from Exercise 15. Wasabi Corp. is currently selling 30,000 units per year and has a 35% tax rate. Required: (a) What is Wasabi Corp.’s current annual income after taxes? (b) Management believes that ...S’No’Kones has the following cost structure. Selling price per unit.......................................... $1.50 Variable cost per unit.......................................... $0.45 Fixed costs per ...Sandford, Inc. makes three types of products: ties, blouses, and shirts. The following selling prices and variable costs are expected for 2009. In addition, ﬁxed costs are as follows: Fixed ...Why do production overhead and selling and administrative expenses need to be separated into their variable and ﬁxed components for budgeting purposes? Why would production overhead costs need to be distinguished from ...Warehouse Foods, Inc. expects to sell one million cases of ﬂexible straws in 2010. Typically, Warehouse Foods has the following selling pattern: 7 percent of annual sales are made in January, February, May, and October; 11 ...Post your question