Annabelle generates revenue by selling toy for $5. The variable cost of goods sold per toy is
Question:
Annabelle generates revenue by selling toy for $5. The variable cost of goods sold per toy is $1, with a selling commission of 10 percent of sales. Fixed manufacturing costs total $25,000 per month, while fixed selling and administrative costs total $10,500. The corporate income tax rate for Annabelle Company is 30 percent.
Required:
a. What is the break-even point for toys?
b. What are target sales in toys to generate a before-tax income of $3,000?
c. What are target sales in toys to generate an after-tax income of $3,080?
d. What is net income assuming Annabelle sells total 15,000 toys?
2) Explain the concept of margin safety and operating leverage. How do they affected in a recessionary environment? What should the company do to avert any losses on breakeven sales?
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura