Pharoah Company produces a single product. It sold 67,500 units last year with the following results: Sales $1,687,500 Variable costs $675,000 Fixed costs 270,000 945,000 Operating income before taxes 742,500 Income taxes (45%) 334,125 Operating income $408,375 In an attempt to improve its product, Pharoah is considering replacing a component part in its product that has a cost of $5 per unit with a new and better part costing $10 per unit during the coming year. A new machine would also be needed to increase plant capacity. The machine would cost $81,000, with a useful life of six years and no salvage value. The company uses straight-line depreciation on all plant assets. What was Pharoah’s break-even point in units last year? Break-even point enter the break-even point in units units How many units of product would Pharoah have had to sell in the past year to earn $222,750 in operating income after taxes? Sales to be made enter a number of units units If it holds the sales price constant and makes the suggested changes, how many units of product must the company sell in the coming year to break even? Break-even enter the break-even point in units units If it holds the sales price constant and makes the suggested changes, how many units of product will Pharoah have to sell to make the same operating income before taxes as last year? Required sales enter the required sales in units units If Pharoah wishes to maintain the same contribution margin ratio, what selling price per unit of product must it charge next year to cover the increased materials costs? (Round answer to 2 decimal places, e.g. 15.25.) Selling price per unit $enter the selling price per unit in dollars rounded to 2 decimal places
Pharoah Company produces a single product. It sold 67,500 units last year with the following results: Sales $1,687,500 Variable costs $675,000 Fixed costs 270,000 945,000 Operating income before taxes 742,500 Income taxes (45%) 334,125 Operating income $408,375 In an attempt to improve its product, Pharoah is considering replacing a component part in its product that has a cost of $5 per unit with a new and better part costing $10 per unit during the coming year. A new machine would also be needed to increase plant capacity. The machine would cost $81,000, with a useful life of six years and no salvage value. The company uses straight-line depreciation on all plant assets. What was Pharoah’s break-even point in units last year? Break-even point enter the break-even point in units units How many units of product would Pharoah have had to sell in the past year to earn $222,750 in operating income after taxes? Sales to be made enter a number of units units If it holds the sales price constant and makes the suggested changes, how many units of product must the company sell in the coming year to break even? Break-even enter the break-even point in units units If it holds the sales price constant and makes the suggested changes, how many units of product will Pharoah have to sell to make the same operating income before taxes as last year? Required sales enter the required sales in units units If Pharoah wishes to maintain the same contribution margin ratio, what selling price per unit of product must it charge next year to cover the increased materials costs? (Round answer to 2 decimal places, e.g. 15.25.) Selling price per unit $enter the selling price per unit in dollars rounded to 2 decimal places
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pharoah Company produces a single product. It sold 67,500 units last year with the following results:
In an attempt to improve its product, Pharoah is considering replacing a component part in its product that has a cost of $5 per unit with a new and better part costing $10 per unit during the coming year. A new machine would also be needed to increase plant capacity. The machine would cost $81,000, with a useful life of six years and no salvage value. The company uses straight-line depreciation on all plant assets.
| Sales | $1,687,500 | |||
| Variable costs | $675,000 | |||
| Fixed costs | 270,000 | 945,000 | ||
| Operating income before taxes | 742,500 | |||
| Income taxes (45%) | 334,125 | |||
| Operating income | $408,375 |
In an attempt to improve its product, Pharoah is considering replacing a component part in its product that has a cost of $5 per unit with a new and better part costing $10 per unit during the coming year. A new machine would also be needed to increase plant capacity. The machine would cost $81,000, with a useful life of six years and no salvage value. The company uses straight-line depreciation on all plant assets.
What was Pharoah’s break-even point in units last year?
| Break-even point | enter the break-even point in units | units |
How many units of product would Pharoah have had to sell in the past year to earn $222,750 in operating income after taxes?
| Sales to be made | enter a number of units | units |
If it holds the sales price constant and makes the suggested changes, how many units of product must the company sell in the coming year to break even?
| Break-even | enter the break-even point in units | units |
If it holds the sales price constant and makes the suggested changes, how many units of product will Pharoah have to sell to make the same operating income before taxes as last year?
| Required sales | enter the required sales in units | units |
If Pharoah wishes to maintain the same contribution margin ratio, what selling price per unit of product must it charge next year to cover the increased materials costs? (Round answer to 2 decimal places, e.g. 15.25.)
| Selling price per unit | $enter the selling price per unit in dollars rounded to 2 decimal places |
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