Breakeven analysis and target profit, taxes Patterson Parkas Companys sales revenue is $30 per unit, variable costs
Question:
Breakeven analysis and target profit, taxes Patterson Parkas Company’s sales revenue is $30 per unit, variable costs are $19.50 per unit, and fixed costs are $147,000. Required
(a) Compute Patterson’s contribution margin per unit and contribution margin ratio.
(b) Determine the number of units Patterson must sell to break even.
(c) Determine the sales revenue required to earn (pretax) income equal to 20% of revenue.
(d) How many units must Patterson sell to generate an after-tax profit of $109,200 if the tax rate is 35%?
(e) Patterson is considering increasing its advertising expenses by $38,500. How much of an increase in sales units is necessary from expanded advertising to justify this expenditure (generate an incremental contribution margin of $38,500)?
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young