Mel's Accessories sells wallets and money clips. Historically, the firm's sales have averaged three wallets for every

Question:

Mel's Accessories sells wallets and money clips. Historically, the firm's sales have averaged three wallets for every money clip. Each wallet has an \(\$ 8\) contribution margin, and each money clip has a \(\$ 6\) contribution margin. Mel's incurs fixed cost in the amount of \(\$ 180,000\). The selling prices of wallets and money clips, respectively, are \(\$ 30\) and \(\$ 15\). The corporate-wide tax rate is 40 percent.

a. How much revenue is needed to break even? How many wallets and money clips does this represent?

b. How much revenue is needed to earn a pre-tax profit of \(\$ 150,000\) ?

c. How much revenue is needed to earn an after-tax profit of \(\$ 150,000\) ?

d. If Mel's earns the revenue determined in (b) but does so by selling five wallets for every two money clips, what would be the pre-tax profit (or loss)? Why is this amount not \(\$ 150,000\) ?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Cost Accounting Foundations And Evolutions

ISBN: 9781618533531

10th Edition

Authors: Amie Dragoo, Michael Kinney, Cecily Raiborn

Question Posted: