Bounce Ltd makes baseballs that sell for $12.50 each. The company's current annual production and sales are 240 000 baseballs. Annual fixed costs are $589,550. Variable costs for each baseball are as follows: 

Direct material $3.00 Direct labour 1.50 Variable overhead 0.40 Variable selling expenses 1.10 Total variable cost $6.00

2. Calculate the break-even point in number of units.
4. Calculate the break-even point in dollars.
6. How many baseballs must the company sell if it wants to earn an after-tax profit of $657,800 with a tax rate of 20 per cent?
8. How many baseballs would the company need to sell to break even if its fixed costs increased by $7,865? (Using original data).
10. Bounce Ltd has received an offer to provide a one-time sale of 8,000 baseballs at $10 each to a network of sports superstores. This sale would not affect other sales, nor would the cost of those sales change. However, the variable costs of the 8,000 baseballs would increase by $0.30 per ball for shipping, and fixed costs would increase by $18,000:

a. Based solely on financial information, should the company accept this offer?

b. What non-financial factors might the company wish to consider in accepting or rejecting this offer?

Answer rating: 100% (QA)

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