Hefty Inc. has engineered a new device that will be marketed for the first time in...

 

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Hefty Inc. has engineered a new device that will be marketed for the first time in the third quarter of the current year. The Marketing Department forecasts 45,000 units could be sold at $41 per unit, but Hefty's management has only allocated enough manufacturing capacity to manufacture 35,000 units of the new product annually. The fixed costs that are associated with the new product are budgeted at $500,000 for the year, which includes $70,000 of depreciation on new manufacturing equipment. Data for each unit of product is below and Hefty is subject to a 40% tax rate. Variable Costs Direct Material $8.00 Direct Labor $4.50 Manufacturing Overhead $5.00 Total Variable Manufacturing Cost $17.50 Selling Expenses $2.50 Total Variable Costs $20.00 Directions Answer the following questions. What is the number of units of new product that Hefty must sell in order to break even during the next fiscal year? What is the maximum after-tax profit that can be earned by Hefty from sales of the new product during the next fiscal year? Hefty Company's management is requiring an after-tax profit of at least $85,000 in order to approve the continued manufacturing of the new product after the next fiscal year. The required unit selling price to achieve this target profit must be at least what? You have determined the number of units that must be sold to BE and required after-tax profit. Reflecting back on the problem, please explain the big-picture of being able to determine these requirements. As you give your thoughts on the "big-picture," please think outside the numbers and assume management wants to know the "why" as it relates to the results of your analysis. Hefty Inc. has engineered a new device that will be marketed for the first time in the third quarter of the current year. The Marketing Department forecasts 45,000 units could be sold at $41 per unit, but Hefty's management has only allocated enough manufacturing capacity to manufacture 35,000 units of the new product annually. The fixed costs that are associated with the new product are budgeted at $500,000 for the year, which includes $70,000 of depreciation on new manufacturing equipment. Data for each unit of product is below and Hefty is subject to a 40% tax rate. Variable Costs Direct Material $8.00 Direct Labor $4.50 Manufacturing Overhead $5.00 Total Variable Manufacturing Cost $17.50 Selling Expenses $2.50 Total Variable Costs $20.00 Directions Answer the following questions. What is the number of units of new product that Hefty must sell in order to break even during the next fiscal year? What is the maximum after-tax profit that can be earned by Hefty from sales of the new product during the next fiscal year? Hefty Company's management is requiring an after-tax profit of at least $85,000 in order to approve the continued manufacturing of the new product after the next fiscal year. The required unit selling price to achieve this target profit must be at least what? You have determined the number of units that must be sold to BE and required after-tax profit. Reflecting back on the problem, please explain the big-picture of being able to determine these requirements. As you give your thoughts on the "big-picture," please think outside the numbers and assume management wants to know the "why" as it relates to the results of your analysis.

Answer rating: 100% (QA)

Okay lets go through the calculations stepbystep 1 What is the number of units of new product that Hefty must sell in order to break even during the next fiscal year To calculate the breakeven point i... View the full answer