Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 19, Problem 19.4BE
(A)
To determine
Target Profit: It refers to the desired amount of profit that a company expects to achieve by the end of an accounting period after it reaches its break-even point. Thus, the company needs to compute the required sales to earn the target profit. The formula to calculate the required sales to earn the target profit is as follows:
To determine: the break-even point in sales units.
(B)
To determine
the break-even point if the company desires a target profit of $500,000.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Target Profit
Altstadt Inc. sells a product for $50 per unit. The variable cost is $20 per unit, and fixed costs are $1,800,000.
Determine (a) the break-even point in sales units and (b) the sales units required to achieve a target profit of $270,000.
a. Break-even point in sales units
units
b. Break-even point in sales units required to achieve a target profit of $270,000
units
Target Profit
Woodsman Company sells a product for $170 per unit. The variable cost is $85 per unit, and fixed costs are $238,000.
Determine (a) the break-even point in sales units and (b) the sales units required for the company to achieve a target profit of $61,880.
a. Break-even point in sales units
units
b. Break-even point in sales units required for the company to achieve a target profit of $61,880
units
Target Profit
Forest Company sells a product for $230 per unit. The variable cost is $100 per unit, and fixed costs are $871,000.
Determine (a) the break-even point in sales units and (b) the sales units required for the company to achieve a target profit of $165,490.
a. Break-even point in sales units
units
b. Break-even point in sales units required for the company to achieve a target profit of $165,490
units
Chapter 19 Solutions
Financial & Managerial Accounting
Ch. 19 - Describe how total variable costs and unit...Ch. 19 - Which of the following costs would be classified...Ch. 19 - Describe how total fixed costs and unit fixed...Ch. 19 - In applying the high-low method of cost estimation...Ch. 19 - If fixed costs increase, what would be the impact...Ch. 19 - Prob. 6DQCh. 19 - If the unit cost of direct materials is decreased,...Ch. 19 - Both Austin Company and Hill Company had the same...Ch. 19 - Prob. 9DQCh. 19 - Prob. 10DQ
Ch. 19 - High-low method The manufacturing costs of...Ch. 19 - Contribution margin Lanning Company sells 160,000...Ch. 19 - Prob. 19.3BECh. 19 - Prob. 19.4BECh. 19 - Prob. 19.5BECh. 19 - Prob. 19.6BECh. 19 - Margin of safety Liu Company has sales of...Ch. 19 - Classify costs Following is a list of various...Ch. 19 - Identify cost graphs The following cost graphs...Ch. 19 - Prob. 19.3EXCh. 19 - Identify activity bases From the following list of...Ch. 19 - Identify fixed and variable costs Intuit Inc....Ch. 19 - Prob. 19.6EXCh. 19 - High-low method Ziegler Inc. has decided to use...Ch. 19 - High-low method for a service company Boston...Ch. 19 - Contribution margin ratio A. Young Company budgets...Ch. 19 - Contribution margin and contribution margin ratio...Ch. 19 - Prob. 19.11EXCh. 19 - Prob. 19.12EXCh. 19 - Break-even sales Currently, the unit selling price...Ch. 19 - Prob. 19.14EXCh. 19 - Prob. 19.15EXCh. 19 - Break even analysis for a service company Sprint...Ch. 19 - Prob. 19.17EXCh. 19 - Prob. 19.18EXCh. 19 - Prob. 19.19EXCh. 19 - Prob. 19.20EXCh. 19 - Prob. 19.21EXCh. 19 - Break-even sales and sales mix for a service...Ch. 19 - Margin of safety A. If Canace Company, with a...Ch. 19 - Prob. 19.24EXCh. 19 - Operating leverage Beck Inc. and Bryant Inc. have...Ch. 19 - Classify costs Seymour Clothing Co. manufactures a...Ch. 19 - Break-even sales under present and proposed...Ch. 19 - Prob. 19.3APRCh. 19 - Prob. 19.4APRCh. 19 - Prob. 19.5APRCh. 19 - Contribution margin, break even sales,...Ch. 19 - Classify costs Cromwell Furniture Company...Ch. 19 - Prob. 19.2BPRCh. 19 - Break even sales and cost-volume-profit chart For...Ch. 19 - Prob. 19.4BPRCh. 19 - Sales mix and break even sales Data related to the...Ch. 19 - Prob. 19.6BPRCh. 19 - Prob. 1ADMCh. 19 - Break-even subscribers for a video service Star...Ch. 19 - Prob. 3ADMCh. 19 - Prob. 19.1TIFCh. 19 - Prob. 19.3TIF
Knowledge Booster
Similar questions
- 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?arrow_forwardKlamath Company produces a single product. The projected income statement for the coming year is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. 2. Suppose 10,000 units are sold above break-even. What is the operating income? 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places, and round the sales revenue to the nearest dollar.) Suppose that revenues are 200,000 more than expected for the coming year. What would the total operating income be?arrow_forwardSales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals 78,000 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Chillmax must make to earn operating income of 81,900 by using the point in sales equation. 2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.arrow_forward
- Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of $30. The companys monthly fixed expenses are $22,500. What is the companys break-even point in units? What is the companys break-even point in dollars? Construct a contribution margin income statement for the month of September when they will sell 900 units. How many units will Maple need to sell in order to reach a target profit of $45,000? What dollar sales will Maple need in order to reach a target profit of $45,000? Construct a contribution margin income statement for Maple that reflects $150,000 in sales volume.arrow_forwardMorris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit variable cost for the three products are as follows: Their sales mix s reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $25,000 per year. What are total variable costs for Morris with their current product mix? Calculate the number of units of each product that will need to be sold in order for Morris to break even. What is their break-even point in sales dollars? Using an income statement format, prove that this is the break-even point.arrow_forwardLotts Company produces and sells one product. The selling price is 10, and the unit variable cost is 6. Total fixed cost is 10,000. Required: 1. Prepare a CVP graph with Units Sold as the horizontal axis and Dollars as the vertical axis. Label the break-even point on the horizontal axis. 2. Prepare CVP graphs for each of the following independent scenarios: (a) Fixed cost increases by 5,000, (b) Unit variable cost increases to 7, (c) Unit selling price increases to 12, and (d) Fixed cost increases by 5,000 and unit variable cost is 7.arrow_forward
- 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.)arrow_forwardKerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The companys monthly fixed expenses are $72,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of January when they will sell 500 units. How many units will Kerr need to sell in order to realize a target profit of $120,000? What dollar sales will Kerr need to generate in order to realize a target profit of $120,000? Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.arrow_forwardGelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?arrow_forward
- Contribution margin Waite Company sells 250,000 units at 120 per unit. Variable costs are 78 per unit, and fixed costs are 8,175,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) operating income.arrow_forwardMarlin Motors sells a single product with a selling price of $400 with variable costs per unit of $160. The companys monthly fixed expenses are $36,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of November when they will sell 130 units. How many units will Marlin need to sell in order to realize a target profit of $48,000? What dollar sales will Marlin need to generate in order to realize a target profit of $48.000? Construct a contribution margin income statement for the month of February that reflects $200,000 in sales revenue for Marlin Motors.arrow_forwardContribution Margin Ratio, Break-Even Sales, Operating Leverage Elgart Company produces plastic mailboxes. The projected income statement for the coming year follows: Required: 1. Compute the contribution margin ratio for the mailboxes. 2. How much revenue must Elgart earn in order to break even? 3. What is the effect on the contribution margin ratio if the unit selling price and unit variable cost each increase by 15%? 4. CONCEPTUAL CONNECTION Suppose that management has decided to give a 4% commission on all sales. The projected income statement does not reflect this commission. Recompute the contribution margin ratio, assuming that the commission will be paid. What effect does this have on the break-even point? 5. CONCEPTUAL CONNECTION If the commission is paid as described in Requirement 4, management expects sales revenues to increase by 80,000. How will this affect operating leverage? Is it a sound decision to implement the commission? Support your answer with appropriate computations.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning