Elliott Trophies makes three types of awards for organizations to give employees or team members. The following are its prices and costs: Price per Unit Variable Cost per Unit Units Sold per Year Sport $ 24 $ 16 36,000 Employee 80 60 9,000 Celebrity 656 516 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: Given this information, how much will Elliott Trophies earn each year after taxes? Assuming the given sales mix is the same at the break-even point, at what sales revenue does Elliott Trophies break even? Assuming the given sales mix, at what sales revenue will the company earn $276,500 per year after taxes? 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: Price per Unit Variable Cost per Unit Units Sold per Year Sport $ 24 $ 16 36,000 Employee 80 60 9,000 Celebrity 656 516 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: Given this information, how much will Elliott Trophies earn each year after taxes? Assuming the given sales mix is the same at the break-even point, at what sales revenue does Elliott Trophies break even? Assuming the given sales mix, at what sales revenue will the company earn $276,500 per year after taxes? 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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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.
Question
Elliott Trophies makes three types of awards for organizations to give employees or team members. The following are its prices and costs:
| Price per Unit | Variable Cost per Unit | Units Sold per Year | |
|---|---|---|---|
| Sport | $ 24 | $ 16 | 36,000 |
| Employee | 80 | 60 | 9,000 |
| Celebrity | 656 | 516 | 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:
- Given this information, how much will Elliott Trophies earn each year after taxes?
- Assuming the given sales mix is the same at the break-even point, at what sales revenue does Elliott Trophies break even?
- Assuming the given sales mix, at what sales revenue will the company earn $276,500 per year after taxes?
- 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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