The Unique Office Supply Company manufactures a line of executive desk staplers. In the current year, sales output totalled 400,000 units at a sales price of $20 per unit. Fixed costs are $3,000,000 per year, and variable costs are $4 per unit. The company's income tax rate is 40%. Consider each of the following requirements independently.

REQUIRED:

1. What is the net income for the current year?

2. What is the present break-even point in units and in revenues?

3. What will the net income be next year if fixed costs increase by 20% and units sold increase by 5%? (Assume all other per-unit data remains unchanged.)

4. Given the changes anticipated in Requirement 3, what would the break-even point in units be for next year?

5. What scenario would management prefer: the current situation or the possible situation in Requirement #3? Why?

6. Refer to the original data. How many units would the company have needed to sell in the current year to earn a net income of $600,000?

Answer rating: 100% (QA)

1 To calculate the net income for the current year we need to subtract the total costs from the total sales revenue The total sales revenue is given by the sales output multiplied by the sales price p... View the full answer