7. Ellsworth Company has signed a contract that requires them to produce and sell 50,000 units...

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7. Ellsworth Company has signed a contract that requires them to produce and sell 50,000 units for $8 per unit. A regression model was run using 27 observations to measure total costs as a function of units. It is as follows: Total costs $90,000+ $6 per unit The standard error of the estimate is $4,000. Required: a. Calculate the following assuming certainty: i. Breakeven in units and dollars ii. Sales quantity needed to obtain an after-tax profit of $24,000. Assume that a 40 percent tax rate is used for only part ii. iii. Sales in dollars needed to obtain a pretax profit equal to 10 percent of sales. b. Calculate the following assuming uncertainty: i. What is the range of incomes that would be expected with 90 percent confidence? ii. What is the range of incomes that would be expected with 95 percent confidence? 7. Ellsworth Company has signed a contract that requires them to produce and sell 50,000 units for $8 per unit. A regression model was run using 27 observations to measure total costs as a function of units. It is as follows: Total costs $90,000+ $6 per unit The standard error of the estimate is $4,000. Required: a. Calculate the following assuming certainty: i. Breakeven in units and dollars ii. Sales quantity needed to obtain an after-tax profit of $24,000. Assume that a 40 percent tax rate is used for only part ii. iii. Sales in dollars needed to obtain a pretax profit equal to 10 percent of sales. b. Calculate the following assuming uncertainty: i. What is the range of incomes that would be expected with 90 percent confidence? ii. What is the range of incomes that would be expected with 95 percent confidence?

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a Calculations Assuming Certainty i Breakeven in Units and Dollars To calculate the breakeven point ... View the full answer