Evergreen Products incurs annual fixed costs of $96,000. Variable costs for their product are $35 per unit, and the sales price is $75 per unit. Evergreen desires to earn an annual profit of $72,000. Use the contribution margin ratio approach to determine the sales volume in dollars and units required to earn the desired profit.

Evergreen Products incurs annual fixed costs of $96,000. Variable costs for their product are $35 per unit, and the sales price is $75 per unit. Evergreen desires to earn an annual profit of $72,000. Use the contribution margin ratio approach to determine the sales volume in dollars and units required to earn the desired profit.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Olivian Company wants to earn 420,000 in net (after-tax) income next year. Its product is priced at 275 per unit. Product costs include: Variable selling expense is 14 per unit; fixed selling and administrative expense totals 290,000. Olivian has a tax rate of 40 percent. Required: 1. Calculate the before-tax profit needed to achieve an after-tax target of 420,000. 2. Calculate the number of units that will yield operating income calculated in Requirement 1 above. (Round to the nearest unit.) 3. Prepare an income statement for Olivian Company for the coming year based on the number of units computed in Requirement 2. 4. What if Olivian had a 35 percent tax rate? Would the units sold to reach a 420,000 target net income be higher or lower than the units calculated in Requirement 3? Calculate the number of units needed at the new tax rate. (Round dollar amounts to the nearest dollar and unit amounts to the nearest unit.)
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