Prob 7-34

Current Year's Net Income

Current Year's Sales Volume
Sales price per DVD
Variable cost per unit purchase price
Handling cost per unit
Annual fixed costs

Expected increase in unit purchase price

BEP =

2. Net income if there is a 10% increase in projected unit sales volume:

New projected sales volume = 200,000 x 110%

= 220,000 units

Net income = 220,000 x $ 16

= 220,000 x $ 4

= $ 880,000 - $600,000

3. Volume of sales to maintain same net income if selling price remains at $16:

Target net income = $ 200,000 (from original problem data)

New disk purchase price = $ 10 x 130%

Volume of sales dollars required:

Volume of sales dollars required = fixed expenses + target net profit/ contribution-margin ratio

Volume of sales dollars required = 600,000 + 200,000

13 - 2

= 800,000 / 0.0625

= $12,800,000

Prob 7-42
DATA INPUT

Units sold

Sales
Costs: Fixed Variable
Direct material $ - $300,000
Direct labor - 200,000
Manufacturing overhead 100,000 150,000
Selling and administrativ 110,000 50,000
Total costs $ 210,000 $700,000
Budgeted operating income

Tax rate

SOLUTION

1. Break-even point in units and in sales dollars:

(a) Unit contribution margin = sales - variable costs /

= $1,000,000 - $ 700,000 /
= $ 3 per unit

Break-even point (in units) = fixed costs / unit contribution margin

= $ 210,000 / $ 3
= 70,000 units

(b) Contribution- margin ratio = contribution margin /

= $1,000,000 - $ 700,000 /
= 0.3

Break-even point (in sales doll = fixed costs / contribution-margin ratio

= $ 210,000 / 0.3
= $ 700,000

2. Number of units of sales required to earn after-tax profit of $90,000 if tax rate is 40%:

Number of units of sales required (fixed costs + (target after tax net income
to earn target after-tax net in = unit contribution margin

= $ 210,000 + $ 90,000 /
/ $ 3

= $ 360,000 / $ 3
= 120,000 units

3. Break-even sales in units if fixed costs increased:

If fixed costs increase by: $31,500

Break-even point (in units) = $ 210,000 + $ 31,500 /

= 80,500 units

5. Number of units of sales required to earn after-tax profit of $90,000 if tax rate is 50%:
Number of units of sales required (fixed costs + (target after-tax net income
to earn target after-tax net in = unit contribution margin

= $ 210,000 + $ 90,000 /
/ $ 3

= $ 390,000 / $ 3
= 130,000 units
 $ 200,000
200,000
$ 16
$ 10
$ 2
$ 600,000

30%

150,000 units

- $ 12 - $600,000

- $600,000

= $280,000

oblem data)

= $ 13

fit/ contribution-margin ratio

/ (( 16 -
) / $ 16 )

100,000

$ 1,000,000
 910,000
$ 90,000

40%

units sold
100,000

sales revenue
$ 1,000,000

(1-t))) /

60%

$ 3
(1-t))) /

0.50
Case 7-55 1 $500,000
2 $1,000,000
3 $13,333,333
4 $1,250,000

Case 7-54 1a 500 units

1b 2500 units
2 Profit under Alternative 1 241200
Profit under Alternative 2 239400
Profit under Alternative 3 204000

Case 7-53 In the excel sheet Chap 7 sol

Prob 7-52 1a 12,00,000

16,00,000
2 19,692,308
3 19,200,000

prob 7-51 1 0.34

2 13000 units
3 decrease by 2.97$
4 10729 units
5 11000 units or 5500 units each

Prob7-50 1 1100 tons

2 $225,000
3 drop this question
4 307.5 tons
5 1224 tons or $612000
6 1140000

7-49,7-48 excel sheet already mailed

Prob 7-47 2 17000 units

3 27000 units
4 BE higher 17000 instead of 15000
Sales required to earn target profit lower 27000 instead of 29000 units

Prob 7-45 E 25000

R 27500
S 40816
3 37500 tubs

Prob 743 and 7-44 Excel sheet already mailed

Prob 7-42 1 70000 or $700000 Refer Full solution sheet
2 120000 units
3 80500 units

Try all problems from 7-34, selected solution given next to the question in the textbook