5-64. Cost Estimation, CVP Analysis, and Decision Making LO 5-4, 5, 8) Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vendin machines. The product, which sells for $5.25 per case, has not had the market success that managers expected and the company is considering dropping Bubbs The product-line income statement for the past 12 months follows $14,682,150 Costs Allocated corporate costs (@5%).. 734,108 15,174,503 $ (492,353) 98,470 $ (393,883) Allowance for tax (@20%) .. All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow: Corporate Revenue Corporate Overhead Costs Most recent year... $106,750,000 $5,337,500 4,221,000 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given above, Mr. Andre provides you with the following data on product costs for Bubbs All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow Corporate Revenue Corporate Overhead Costs Most recent year.... $106,750,000 $5,337500 4,221,000 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given above, Mr. Andre provides you with the following data on product costs for Bubbs: Month Production Costs $1,139,828 1,161,328 1,169,981 1,185,523 1,187,827 1,208,673 1,183,699 1,226,774 1,225,226 1,237,325 1,241,760 1,272,451 2.____..__...217,200 4..___.__...228,000 5..._..__.... 224,400 6...__.... 237000 7.____. ._....220,200 8.___...247,200 9..___.___...238,800 0.____... 252,600 1____... 250,200 2._.__... 259,200 10. What is the monthly break-even number of cases of Bubbs? Consider whether or not to include some 11. What is the fixed production cost per case based on the current sales volume per month? Round to four 12. The following questions are based on Luke's current accounting practices. Recalculate the CM per case 13. Calculate the break-even for Bubbs in cases per month based on production fixed costs and the CM 4. Write out a profit formula for Bubbs using Q, CM, and FC as in the prior question. For the desired profit portion of the fixed allocated costs. Round to the nearest whole number. decimals. of Bubbs based on production costs and the treatment of allocated overhead as a variable cost based on revenues. Round to four decimals. calculated above note the after tax profit is .05 P Q/(1-TX), where P is the selling price per case and TX is the tax rate. Now solve for Q to determine the number of case Bubbs must produce and sell per month to earn a 5% return on revenues 5-64. Cost Estimation, CVP Analysis, and Decision Making LO 5-4, 5, 8) Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vendin machines. The product, which sells for $5.25 per case, has not had the market success that managers expected and the company is considering dropping Bubbs The product-line income statement for the past 12 months follows $14,682,150 Costs Allocated corporate costs (@5%).. 734,108 15,174,503 $ (492,353) 98,470 $ (393,883) Allowance for tax (@20%) .. All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow: Corporate Revenue Corporate Overhead Costs Most recent year... $106,750,000 $5,337,500 4,221,000 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given above, Mr. Andre provides you with the following data on product costs for Bubbs All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow Corporate Revenue Corporate Overhead Costs Most recent year.... $106,750,000 $5,337500 4,221,000 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given above, Mr. Andre provides you with the following data on product costs for Bubbs: Month Production Costs $1,139,828 1,161,328 1,169,981 1,185,523 1,187,827 1,208,673 1,183,699 1,226,774 1,225,226 1,237,325 1,241,760 1,272,451 2.____..__...217,200 4..___.__...228,000 5..._..__.... 224,400 6...__.... 237000 7.____. ._....220,200 8.___...247,200 9..___.___...238,800 0.____... 252,600 1____... 250,200 2._.__... 259,200 10. What is the monthly break-even number of cases of Bubbs? Consider whether or not to include some 11. What is the fixed production cost per case based on the current sales volume per month? Round to four 12. The following questions are based on Luke's current accounting practices. Recalculate the CM per case 13. Calculate the break-even for Bubbs in cases per month based on production fixed costs and the CM 4. Write out a profit formula for Bubbs using Q, CM, and FC as in the prior question. For the desired profit portion of the fixed allocated costs. Round to the nearest whole number. decimals. of Bubbs based on production costs and the treatment of allocated overhead as a variable cost based on revenues. Round to four decimals. calculated above note the after tax profit is .05 P Q/(1-TX), where P is the selling price per case and TX is the tax rate. Now solve for Q to determine the number of case Bubbs must produce and sell per month to earn a 5% return on revenues