QUESTION: THE JESSUP COMPANY EXPECTS TO INCUR OVERHEAD COSTS OF $20,000 PER MONTH AND DIRECT PRODUCTION COSTS OF $125 PER UNIT. ESTIMATED PRODUCTION ACTIVITY FOR THE UPCOMING YEAR IS 1,000 UNITS. IF THE COMPANY DESIRES TO EARN A GROSS PROFIT OF $50 PER UNIT, THE SALES PRICE PER UNIT WOULD BE WHICH OF THE FOLLOWING AMOUNTS?

QUESTION: THE JESSUP COMPANY EXPECTS TO INCUR OVERHEAD COSTS OF $20,000 PER MONTH AND DIRECT PRODUCTION COSTS OF $125 PER UNIT. ESTIMATED PRODUCTION ACTIVITY FOR THE UPCOMING YEAR IS 1,000 UNITS. IF THE COMPANY DESIRES TO EARN A GROSS PROFIT OF $50 PER UNIT, THE SALES PRICE PER UNIT WOULD BE WHICH OF THE FOLLOWING AMOUNTS?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 3DQ: Suppose a company finds that shipping cost is 3,560 each month plus 6.70 per package shipped. What...

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Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
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