Mother Goose, Co. has a product, a 3D storybook that allows the reader to be one...

 

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Mother Goose, Co. has a product, a 3D storybook that allows the reader to be one of the characters in the book, which sells for $24 per unit. The variable costs are $14 per unit, and fixed costs total $62,000 per year. Mother Goose is wanting to make some decisions about this product and has asked for your help in some analysis. Required: 1. What is the break-even point in units for this product for Mother Goose Co.? 2. What is the total (not per unit) contribution margin at the break-even point? 3. If Mother Goose desires to earn a pre-tax income of $250,000, how many units must it sell? 4. If Mother Goose desires to earn an after-tax income of $190,000, how many units must it sell if the tax rate is 30%? 5. What if Mother Goose plans to increases sales by 10% above the level achieved in part d, and assuming fixed costs remain unchanged, by what dollar amount would after-tax income (net income) be expected to increase? 6. The marketing manager informs management that to increase sales volume by 10%, as considered in part e, they would need to increase advertising by $15,000 per year. How many additional units would have to be sold to maintain the income after tax (as found in part d based on the 10% increase in sales) if advertising is increased by $15,000? 7. If instead of trying to sell more units as in part f, Mother Goose chose to increase the selling price per unit to cover the additional $15,000 in advertising expense, by how much would they have to increase the selling price to still maintain the same after-tax income (as found ine based on the 10% increase in sales). Mother Goose, Co. has a product, a 3D storybook that allows the reader to be one of the characters in the book, which sells for $24 per unit. The variable costs are $14 per unit, and fixed costs total $62,000 per year. Mother Goose is wanting to make some decisions about this product and has asked for your help in some analysis. Required: 1. What is the break-even point in units for this product for Mother Goose Co.? 2. What is the total (not per unit) contribution margin at the break-even point? 3. If Mother Goose desires to earn a pre-tax income of $250,000, how many units must it sell? 4. If Mother Goose desires to earn an after-tax income of $190,000, how many units must it sell if the tax rate is 30%? 5. What if Mother Goose plans to increases sales by 10% above the level achieved in part d, and assuming fixed costs remain unchanged, by what dollar amount would after-tax income (net income) be expected to increase? 6. The marketing manager informs management that to increase sales volume by 10%, as considered in part e, they would need to increase advertising by $15,000 per year. How many additional units would have to be sold to maintain the income after tax (as found in part d based on the 10% increase in sales) if advertising is increased by $15,000? 7. If instead of trying to sell more units as in part f, Mother Goose chose to increase the selling price per unit to cover the additional $15,000 in advertising expense, by how much would they have to increase the selling price to still maintain the same after-tax income (as found ine based on the 10% increase in sales).

Answer rating: 100% (QA)

In the given case Sale per unit 24 variable cost per unit 14 and fixed cost total 62000 Contribution margin per unit Sales price per unit variable cos... View the full answer