HITECH ELECTRONICS Projected Earnings Statement For the Year Ended December 31, 2022 Tablets Touch Screen Remotes Combined Total Per Total Per unit (in '000s) unit (in '000s) Total (in '000s) Sales $1,050 $15.00 $3,150 $22.50 Production costs: Materials 280 4.00 630 4.50 910.00 Direct labor 140 2.00 420 3.00 560.00 Var. Overhead 140 2.00 280 2.00 420.00 Fixed Overhead 70 1.00 210 1.50 280.00 Total production Costs $ 630 $9.00 $1,540 $ 11.00 $2,170.00 Gross margin $ 420 $6.00 $1,610 $ 11.50 $2,030.00 Fixed selling and Administrative 1,040.00 Net income before Income Taxes Income taxes (55%) Net Income 990.00 544.50 $ 445.50
HITECH ELECTRONICS
HiTech Electronics manufactures two new products, Tablets and Touch Screen Remotes, and sells them nationally to wholesalers and retailers. The HiTech management is very pleased with the company’s performance for the current fiscal year. Projected sales through December 31, 2022, indicate that 70,000 Tablets and 140,000 Remotes will be sold this year. The projected earnings statement, which appears below, shows that HiTech will exceed its earnings goal of 9 percent on sales after taxes.
The Tablet business has been fairly stable for the last few years, and the company does not intend to change the Tablet price. However, the competition among manufacturers of Touch Screen Remotes has been increasing. HiTech’s Remotes have been very popular with consumers.
In order to sustain this interest in their Remotes and to meet the price reductions expected from competitors, management has decided to reduce the wholesale price of its calculator from $22.50 to $20.00 per unit effective January 1, 2023. At the same time the company plans to spend an additional $57,000 on advertising during the fiscal year 2023. As a consequence of these actions, management estimates that 80 percent of its total revenue will be derived from Remote sales as compared to 75 percent in 2022. As in prior years, the sales mix is assumed to be the same at all volume levels.
The total fixed
Required:
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For 2022:
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What is the Total Fixed cost?
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What is the CONTRIBUTION MARGIN/Tablet ?
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What is the CONTRIBUTION MARGIN/Remote ?
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What is the Product mix?
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To break even in 2022, HiTech must sell _______ (#) Tablets
and ________ (#)Remotes.
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For 2023:
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What are the total Fixed costs?
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What is the CONTRIBUTION MARGIN/Tablet ?
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What is the CONTRIBUTION MARGIN/Remote ?
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What is the Product mix?
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To break even in 2023, HiTech must sell _______(#)Tablets
and ________ (#) Remotes.
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For 2023, if HiTech Electronics is to earn a profit equal to 9 percent on sales after taxes
a. HiTech must sell _______(#)Tablets and ________ (#) Remotes. b. What would be the volume of sales (total sales revenue)?
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Derive the equation describing the level of profits in 2023 as a function of the number of Tablets and Remotes sold.
Plot the breakeven line and the line representing a profit of 9 percent of sales after taxes in a graph with Number of Tablets along the X-axis and Number of Remotes along the Y-axis.
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