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 per Year Unit $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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Please answer questions C and D. The revenue after taxes each year is $360,240.

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
per Year
Unit
$ 24
80
656
Req A
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:
Unit
$ 16
60
516
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?
Req B
36,000
9,000
3,000
Complete this question by entering your answers in the tabs below.
Req C
Answer is not complete.
Req D
Given this information, how much will Elliott Trophies earn each year after taxes?
Earnings $360,240

Expert Solution

Step 1: Introduction

One of the techniques used in cost accounting is the cost-volume-profit analysis, which examines the effects of various levels of costs and volume on the operational profit of the company. The CVP analysis is used by businesses to assess the volume of units they must sell to break even, that is, to cover all of their expenditures or achieve a predetermined minimum profit margin. It is also referred to as the "breakeven analysis" because it establishes the breakeven point for various sales volumes and cost structures, information that managers can use to make immediate business choices.

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