The Asian Division of Worldwide Reference Corporation produces a pocket dictionary containing popular phrases in six Asian languages. Annual budget data for the coming year follow. Projected sales are 100,000 books.

Required:
1. Calculate the break-even point in units and in sales dollars.
2. If the Asian Division is subject to an income-tax rate of 40 percent, compute the number of units the division would have to sell to earn an after-tax profit of $180,000.
3. If fixed costs increased $63,000 with no other cost or revenue factor changing, compute the division’s break-even sales in units.
4. Assuming the original data, prepare a profit-volume graph tor the Asian Division.
5. Due to an unstable political situation in the country in which the Asian Division is located, management believes the country may split into two independent nations. If this happens, the tax rate could rise to 50 percent. Assuming all other data as in the original problem, how many pocket d Lionaries must be sold to earn S 180.000 after taxes?
6. Construct an Excel spreadsheet to solve requirements (1), (2), (3), and (5) above. Show how the solution will change if the following information changes: sales amounted to $2,100,000, and fixed manufacturing overhead was $220,000.
(‘DMA,adapted)

Transcribed Image Text:

Sales Costs: ..$2,000,000 Direct material. Direct labor.. Manufacturing overhead. Selling and administrative Variable ixed 600,000 0- 400,000 300,000 200,000 100,000 220,000 Total costs. Budgeted operating income . $1,400,000 $420,000 1,820,000 $ 180,000