Zachary Company produces a product that has a variable cost of $28 per unit and a sales price of $68 per unit. The company's annual fixed costs total $770,000. It had a net income of $330,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $60 per unit. A. If Zachary desires to maintain a net income of $330,000, how many additional units must it sell to justify the price decline? B. Assume that in addition to lowering its selling price to $60, Zachary also desires to increase its net income by $84,000. Determine the number of units the company must sell to earn the desired income.

Zachary Company produces a product that has a variable cost of $28 per unit and a sales price of $68 per unit. The company's annual fixed costs total $770,000. It had a net income of $330,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $60 per unit. A. If Zachary desires to maintain a net income of $330,000, how many additional units must it sell to justify the price decline? B. Assume that in addition to lowering its selling price to $60, Zachary also desires to increase its net income by $84,000. Determine the number of units the company must sell to earn the desired income.

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 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...

See similar textbooks

Similar questions

Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
Poleski Manufacturing, which maintains the same level of inventory at the end of each year, provided the following information about expenses anticipated for next year: The selling price of Poleskis single product is 16. In recent years, profits have fallen and Poleskis management is now considering a number of alternatives. Poleski wants to have a net income next year of 250,000, but expects to sell only 120,000 units unless some changes are made. The president of Poleski has asked you to calculate the companys projected net income (assuming 120,000 units are sold) and the sales needed to achieve the companys net income objective for next year. Also, compute Poleskis contribution margin per unit, contribution margin ratio, and break-even point for next year. The worksheet CVP has been provided to assist you. Note that the data from the problem have already been entered into the Data Section of the worksheet.
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?
Star Boy Company sells a single product, Product X. Last year, sales revenue amounted to P700,000and total variable and fixed costs amounted to P420,000 and P210,000, respectively. The productswere sold at P7 per unitA study was made by the sales manager. It disclosed that the unit selling price could be increased by20% but with a corresponding decrease by 15% of the volume sold. If Star Boy Companyincorporates the changes in its next year forecast, what is the income for Product X?
Naylor Company produces a product that has a variable cost of Rs. 13 per unit; the product sells for Rs. 28 per unit. The company’s annual fixed costs total Rs. 375,000; it had net income of Rs. 75,000 in the previous year. In an effort to increase the company’s market share, management is considering lowering the selling price to Rs. 25 per unit. Required: If Naylor desires to maintain net income of Rs. 75,000, how many additional units must it sell to justify the price decline?
D) Nuevo Company manufactures a product which sells for P5. At present, the company produces and sells 50,000 units per year. Unit variable manufacturing and marketing expenses are P2.50 and P.50 respectively. Fixed expenses are P70,000 for tactonY overhead and P30,000 for marketing and administration. The sales manager hos proposed that the price be increased to P6. To maintain the present sales volume. advertising must be increased. The company's profit objective is 10% of sales. 2. Compute the additional expenditure the company can afford for advertising. E) The annuUal FC amounted to P798,000. At present, the contribution margin ratio is 42%. 3. Determine the amount of sales if the desired profit is P173,800 net of the ff. fax rates: For the first P100,000 25% In excess of P100,000 35% F) Bosh Company expects to incur the following costs to produce and sell 70,000 units of its product: Variable manufacturing cost Fixed manufacturing cost Variable marketing expense Fixed marketing…
Jely Company manufactures a single product. In the prior year, the company had sales of P90,000, variable costs of P50,000, and fixed costs of P30,000 Sam expects its cost structure and sales price per unit to remain the same in the current year, however total sales are expected to increase by 20 percent. If the current year projections are realized, net income should exceed the prior year's net income by:
If you give me wrong answer, I will give you unhelpful rate
Assume Wyteboard Corp. markers uses 1,440,000 gallons of ink each year. Assume Palmer will order the ink at a rate of P2 per gallon plus a fixed cost of P100 per order. At cost, the firm's carrying cost is 20% of the inventory value. What is Wyteboard's minimum costs of ordering and holding inventory? SHOW THE ANSWER IN A GOOD ACCOUNTING FORM
What is the lowest units sales price Ralston could receive and still make a before-tax profit of $39,600 on the special order?
W Company sells only one product with a selling price of $200 and a variable cost of $80 per unit. The company’s monthly fixed expense is $60,000. Required: A) Determine the breakeven point in units sold and sales dollars. B) Determine the breakeven point in units sold and sales dollars if the company wants a net income of $30,000. C) Determine margin of safety if current sales are $175,000.
KLM Company produces a single product. The selling price is OMR 40 a unit and the variable costs is OMR 25 a unit. The annual fixed costs of the business are OMR 4000. The business aims to make OMR 16625 profit during the forthcoming year. How much sales (OMR) required to achieve this target profit? Select one: a. OMR 60000 b. OMR 44000 c. OMR 48700 d. OMR 55000