After-Tax Target Income: Profit Analysis can sell between 9,000 and 14,000 pairs of 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 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: Per-Unit (Pair) Data Mountaineering Touring Selling price $180 $120 Variable costs 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? 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)
After-Tax Target Income: Profit Analysis can sell between 9,000 and 14,000 pairs of 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 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: Per-Unit (Pair) Data Mountaineering Touring Selling price $180 $120 Variable costs 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? 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)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:After-Tax Target Income: Profit Analysis
can sell between 9,000 and 14,000 pairs of
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
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:
Per-Unit (Pair) Data
Mountaineering
Touring
Selling price
$180
$120
Variable costs
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?
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)
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