After-Tax Target Income: Profit Analysis X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that it can sell between 9,000 and 14,000 pairs of either product this year. Because the models are very similar, X- Cee-Ski will produce only one of the two models. The following information was compiled by the Accounting Department: Selling price Variable costs Per-Unit (Pair) Data Mountaineering Touring $180 $120 130 90 Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income tax rate. Required: 1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell? 10,000 pairs of touring skis 2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or loss regardless of the ski model it decided to produce? 3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted) Mountaineering model✓
After-Tax Target Income: Profit Analysis X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that it can sell between 9,000 and 14,000 pairs of either product this year. Because the models are very similar, X- Cee-Ski will produce only one of the two models. The following information was compiled by the Accounting Department: Selling price Variable costs Per-Unit (Pair) Data Mountaineering Touring $180 $120 130 90 Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income tax rate. Required: 1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell? 10,000 pairs of touring skis 2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or loss regardless of the ski model it decided to produce? 3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted) Mountaineering model✓
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:After-Tax Target Income: Profit Analysis
X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the
touring model. The Sales Department assures management that it can sell between 9,000 and 14,000 pairs of either product this year. Because the models are very similar, X-
Cee-Ski will produce only one of the two models.
The following information was compiled by the Accounting Department:
Selling price
Variable costs
Per-Unit (Pair) Data
Mountaineering
Touring
$180
$120
130
90
Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income
tax rate.
Required:
1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell?
10,000 pairs of touring skis
2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or
loss regardless of the ski model it decided to produce?
x
3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted)
Mountaineering model✓
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