7. For ABC COMPANY, how many units have to be sold in order to earn an after‑tax net income of $360,000? a. 28,000 b. 48,000 c. 68,000 d. 88,000
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USE THE FOLLOWING FOR QUESTIONS 7--10:
ABC COMPANY
Units sold 30,000
Selling price $100 per unit
Variable costs $90 per unit
Total fixed costs $400,000
Tax rate 25%
7. For ABC COMPANY, how many units have to be sold in order to earn an after‑tax net income of $360,000?
a. 28,000
b. 48,000
c. 68,000
d. 88,000
8. For ABC COMPANY, using one of the short-cut tricks that you learned, assuming the sales increase by 15%, what would be the increase in net income? HINT: First prepare an income statement at the current level of activity (30,000 units)
| a. | $45,000 |
| b. | $50,000 |
| c. | $450,000 |
| d. |
$650,000
|
9. For ABC COMPANY, using the other short-cut trick that you learned, assuming sales price increased by 15%, what would be the increase in net income? HINT: First prepare an income statement at the current level of activity (30,000 units)
| a. | $45,000 |
| b. | $50,000 |
| c. | $450,000 |
d. $650,000
10. Suppose ABC COMPANY makes the following changes in its cost structure: variable costs decrease by $15/unit and fixed costs increase 60%. What will be the effect on the breakeven point in units? HINT: Using the original data at 30,000 units, first calculate the old breakeven point.
A. Decrease by 14,400 units
B Decrease by 12,400 units
C. Decrease by 10,400 units
D. Decrease by 8,400 units
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