Alabama Products Co. uses an automated process to manufacture a designer label bag for sale to...

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Alabama Products Co. uses an automated process to manufacture a designer label bag for sale to executives. The product sells for $65.00. The company has established the following costs per unit: ▸ Raw material = $20.00 ▸ Direct labour = $15.00 ► Variable overhead = $4.00 The fixed overhead is $13,000 per annum. The company budgeted to produce 2,000 bags per annum. The company's tax rate is 30%. Required: 1-Use CVP analysis via the contribution margin to calculate the break- even point in units and dollars. (Hints: You are required to calculate the break- even point in terms of units through contribution margin per unit and in terms of dollars through contribution margin ratio.) 2-How many units would need to be sold to earn the company a before tax profit of $26,000? Alabama Products Co. uses an automated process to manufacture a designer label bag for sale to executives. The product sells for $65.00. The company has established the following costs per unit: ▸ Raw material = $20.00 ▸ Direct labour = $15.00 ► Variable overhead = $4.00 The fixed overhead is $13,000 per annum. The company budgeted to produce 2,000 bags per annum. The company's tax rate is 30%. Required: 1-Use CVP analysis via the contribution margin to calculate the break- even point in units and dollars. (Hints: You are required to calculate the break- even point in terms of units through contribution margin per unit and in terms of dollars through contribution margin ratio.) 2-How many units would need to be sold to earn the company a before tax profit of $26,000?

Answer rating: 100% (QA)

1 Calculating the BreakEven Point The contribution margin per unit can be calculated as follows Cont... View the full answer