Prokina Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price
Question:
Variable costs
Manufacturing ......... $60 per unit
Selling ............. 24 per unit
Fixed costs
Manufacturing ......... $360,000 per year
Selling and administrative ...... $162,000 per year
Required
a. Use the per-unit contribution margin approach to determine the break-even point in units and dollars.
b. Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a profit of $232,000.
c. Suppose that variable selling costs could be eliminated by employing a salaried sales force. If the company could sell 6,400 units, how much could it pay in salaries for salespeople and still have a profit of $232,000? (Hint: Use the equation method.)
Contribution Margin
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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Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old
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