Brightspace x Exam Supplementary Test 2 - Requires Respondus Time Limit: 3:15:00 Time Left:2:55:56 Anju Kumari Ray: Attempt 1 Page 1: Question 1 (25 points) 1 2 3 P & B Lid manufactures and sells pens. The total fixed costs is $400,000 per year. The price per unit is $31.85, the variable costs per unit is $13, the income tax rate is 35%; and the net profit, after tax, is $1,100,000. Required 4 5 a. Prepare the income statement using the variable costing system (contribution margin). (3marty) b. As a management accountant, your manager asked you to find I. How many units does the company need to sell, to break even? (3 marks) II. How many units does it need to sell, to carn a net profit, before tax, of $120,000? (3 maria/ Ill. What is the company's net profit, after tax, if it sells 40,000 units? [3 marks) c. If the fixed costs decrease by 10% and the contribution margin per unit increases by 20%, how many units will the company need to sell, to achieve a profit of $15,0007 Comment on the resalix. Check your answer by preparing the income statement. (10 marks) d. If the company produces 35,000 units in one year, and sells 32,000 of them, which method of computing operating income (absorption costing (gross margin) of variable costing ( contribution margin)) will result in a higher operating income? Why? (Provide only a written explanation; no calculations are required) (3 marks) [Tosel for Question 1: 25 marks) Here for Formula Sheet (PDF)