A. The Thunderstorm Company, a producer of specialty cards, wants you to complete several calculations based on

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Question:

A. The Thunderstorm Company, a producer of specialty cards, wants you to complete several calculations based on the information given:

Selling Price/Unit = $6.60

Variable Cost/Unit = $5.28 Total Fixed Costs = $46,200

Required to calculate the following:

a. Break Even point in units

. Selling price - 6.60

(-) Variable costs - (5.28)

Contribution - 1.32

Break even point is the point at which contribution earned covers all the fixed costs. That is it is the point at which profit is zero and all costs are recovered.

Break even point = Fixed costs/contribution per unit

= 46,200/1.32

= 35,000 units.

b. Sales Volume necessary to produce a net income of $13,028.40

To earn a after tax income of 13028.4

We have earn a pre tax profit of = 13028.40 x 100% /(100-30%)

= 18,612.

Total contribution requires = Fixed cost + Desired profit

= 46,200+18,612

= 64,812.

Sales required = contribution required/Contribution per unit

= 64,812/1.32

= 49,100 units

Sales in amount = 49,100 x 6.6 = 324,060.

Checking answer

Sales - 49,100 x 6.6 - 324,060

(-) variable cost - 49,100 x 5.28 - (259,248)

Contribution. - 64,812

(-) Fixed cost -. 46,200

Profit - 18,612

(-) Tax @ 30%. - ( 5583.6)

Net income - 13,028.4

c. Total Units required to be sold to earn a Net Income of $18,480

Pre tax profit required = 18480 x 100%/(100%-30%)

= 26,400

Contribution required = Fixed costs + Desired profit

= 46,200 + 26,400

= 72,600

Sales required. = Desired profit / contribution per unit

= 72,600/1.32

= 55,000 units.

Checking answer

Contribution = (6.6-5.28) x 55,000 = 72,600

(-) Fixed cost (46,200)

Profit. 26,400

(-) Tax @30%. (7920)

Net Income. 18,480

B. Based on the results above, how would you interpret the numbers? Explain the advantages of using this analysis and how it supports the Business in making important decisions.