The following information is available for Lost Trails Sales Price 150 variable manufacturing costs 85 Commission 10%
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Question:
The following information is available for Lost Trails | ||||||||||
Sales Price | 150 | |||||||||
variable manufacturing costs | 85 | |||||||||
Commission | 10% of sales price | |||||||||
Fixed Costs | $200,000 | |||||||||
Answer the following | ||||||||||
1. What is the contribution margin (CM) per unit? | ||||||||||
2. What is the CM ratio? | ||||||||||
3. What is the break-even point in units? | ||||||||||
4. What is the break-even point in dolllars? | ||||||||||
5. What is our income before taxes if we sell 5,000 units? | ||||||||||
6. How many units must we sell to earn $90,000 after taxes if the tax rate is 40%? | ||||||||||
7. Suppose we are selling 4,800 units. We think that if we lower the sales price by 10% that sales will increase 25%. | ||||||||||
Determine the income under both alternatives. (Now and if we lower price) | ||||||||||
8. We can buy a new machine that will reduce variable manufacturing costs by $6 per unit. Fixed costs | ||||||||||
will increase $90,000. We are currently selling 5,000 units. Should we bjuy the machine at this level? | ||||||||||
Show why or why not. | ||||||||||
9. At what level of units would we be indifferent to buying or not (that is income would be the same) | ||||||||||
10. We are considering elimianting | the commission and paying fixed salaries of an additional $100,000 | |||||||||
per year. We are selling10,000 units. Would we be better off to eliminate the commission? | ||||||||||
Show why or why not. |
Related Book For
Introduction to Operations and Supply Chain Management
ISBN: 978-1292093420
4th Global edition
Authors: Cecil B. Bozarth, Robert B. Handfield
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