Elliott Trophies makes three types of awards for organizations to give employees or team members. The following are its prices and costs: Sport Employee Celebrity Price per Variable Cost per Units Sold Unit per Year $ 24 80 656 Unit $ 16 60 516 36,000 9,000 3,000 Fixed costs of $432,000 per year Include building and equipment costs, marketing costs, and the costs of administration. Elliott Trophies is subject to a 21 percent tax rate on income. Required: c. Assuming the given sales mix, at what sales revenue will the company earn $276,500 per year after taxes? d. Elliott Trophies is concerned about the future of the Celebrity trophy market, given recent cost-cutting by companies and is considering becoming more specialized in the Sport and Employee market. If Elliott Trophies drops the Celebrity model, fixed costs will fall to $402,000 per year. If It follows through with this plan, Elliott Trophies expects that the relative sales mix between the Sport and Employee models will remain the same. That is, for every 36,000 units of the Sport model sold, Elliott Trophies would expect to sell 9,000 units of the Employee model. How many units of the Sport and Employee models would Elliott Trophies have to sell to achieve the same after-tax Income It currently earns with the three models?
Elliott Trophies makes three types of awards for organizations to give employees or team members. The following are its prices and costs: Sport Employee Celebrity Price per Variable Cost per Units Sold Unit per Year $ 24 80 656 Unit $ 16 60 516 36,000 9,000 3,000 Fixed costs of $432,000 per year Include building and equipment costs, marketing costs, and the costs of administration. Elliott Trophies is subject to a 21 percent tax rate on income. Required: c. Assuming the given sales mix, at what sales revenue will the company earn $276,500 per year after taxes? d. Elliott Trophies is concerned about the future of the Celebrity trophy market, given recent cost-cutting by companies and is considering becoming more specialized in the Sport and Employee market. If Elliott Trophies drops the Celebrity model, fixed costs will fall to $402,000 per year. If It follows through with this plan, Elliott Trophies expects that the relative sales mix between the Sport and Employee models will remain the same. That is, for every 36,000 units of the Sport model sold, Elliott Trophies would expect to sell 9,000 units of the Employee model. How many units of the Sport and Employee models would Elliott Trophies have to sell to achieve the same after-tax Income It currently earns with the three models?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Elliott Trophies makes three types of awards for organizations to give employees or team members. The following are its prices and
costs:
Sport
Employee
Celebrity
Price per Variable Cost per Units Sold
Unit
per Year
$ 24
80
656
Unit
$ 16
60
516
36,000
9,000
3,000
Fixed costs of $432,000 per year Include building and equipment costs, marketing costs, and the costs of administration. Elliott
Trophies is subject to a 21 percent tax rate on income.
Required:
c. Assuming the given sales mix, at what sales revenue will the company earn $276,500 per year after taxes?
d. Elliott Trophies is concerned about the future of the Celebrity trophy market, given recent cost-cutting by companies and is
considering becoming more specialized in the Sport and Employee market. If Elliott Trophies drops the Celebrity model, fixed costs
will fall to $402,000 per year. If It follows through with this plan, Elliott Trophies expects that the relative sales mix between the
Sport and Employee models will remain the same. That is, for every 36,000 units of the Sport model sold, Elliott Trophies would
expect to sell 9,000 units of the Employee model. How many units of the Sport and Employee models would Elliott Trophies have to
sell to achieve the same after-tax Income It currently earns with the three models?
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