1. What is the breakeven point in units sold? What is the breakeven point in sales dollars? 2. How many units need to be sold to earn an aftertax profit of $ 500,000. Assume a tax rate of 30% 3. What is the margin of safety in $?

1. What is the breakeven point in units sold? What is the breakeven point in sales dollars? 2. How many units need to be sold to earn an aftertax profit of $ 500,000. Assume a tax rate of 30% 3. What is the margin of safety in $?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Average estimated selling price per electric bike is 525, Budgeted 2022 sales volumes is 11900.

CVP Budgeted Income Statement for year ended 31st December 2022
Sales
$
6,247,500
Less: Variable Costs
$ 2,523,622
Cost of Sales
$ 2,441,026
Selling & Administration variable costs
82,596
Total Contribution Margin
$ 3,723,878
$ 1,243,200
$
Less: Fixed costs
Selling & Administration fixed costs
1,243,200
Net operating income
$
2,480,678
Interest costs
3,900
Income Tax
$
743,033
Net Income after tax
$ 1,733,745

1. What is the breakeven point in units sold? What is the breakeven point in sales dollars?
2. How many units need to be sold to earn an aftertax profit of $ 500,000. Assume a tax rate of
3. What is the margin of safety in $?
|4. If sales were to increase by 15% in 2023 from 2022 projected levels and expense behaviour remains the same for 2023 as in 2022,
how much will net income before tax and interest increase by as a percentage. Use operating leverage to answer this.
5. If CBH spend $ 50,000 on an advertising campaign, it believes sales (units) will increas
30%
5.00%
without any change in average selling price. Should it take on the advertising? Why or why not?

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