3-13 CVP analysis, income taxes. (LO 2, 3) Diego Motors is a small car dealership. On average it sells a car for $26,000, which it purchases from the manufacturer for $22,000. Each month, Diego Motors pays $60,000 in rent and utilities and $70,000 for salespeople's salaries. In addition to their salaries, salespeople are paid a commission of $500 for each car they sell. Diego Motors also spends $10,000 each month for local advertisements. Its tax rate is 40%. Required 1. How many cars must Diego Motors sell each month to break even? 2. Diego Motors has a target monthly net income of $63,000. What is its target operating income? How many cars must be sold each month to reach the target monthly net income of $63,000?

3-13 CVP analysis, income taxes. (LO 2, 3) Diego Motors is a small car dealership. On average it sells a car for $26,000, which it purchases from the manufacturer for $22,000. Each month, Diego Motors pays $60,000 in rent and utilities and $70,000 for salespeople's salaries. In addition to their salaries, salespeople are paid a commission of $500 for each car they sell. Diego Motors also spends $10,000 each month for local advertisements. Its tax rate is 40%. Required 1. How many cars must Diego Motors sell each month to break even? 2. Diego Motors has a target monthly net income of $63,000. What is its target operating income? How many cars must be sold each month to reach the target monthly net income of $63,000?

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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