Cost Accounting (15th Edition)

Published by Prentice Hall
ISBN 10: 0133428702
ISBN 13: 978-0-13342-870-4

Chapter 3 - Cost-Volume-Profit Analysis - Assignment Material - Exercises - Page 95: 3-23(2)

Answer

The question requires (a) calculation of number of units to be sold to earn target "operating" income of 450,000 and; (b) Number of units to be sold to earn target "net" income of 450,000. As explained in 3-21(1) part, here the question specifically ask you to provide before tax (operating) and after tax (net) results separately for the same scenario. Make sure to treat them separately as follows;

Work Step by Step

Note-1: Fixed Costs Manufacturing fixed costs 1,200,000 fixed marketing costs 300,000 total fixed costs 1,500,000 Note-2: Contribution Margin Per Unit Sales Price 30 Variable Costs - direct 21 Variable Costs - sale commissions (30 * 5%) = 1.5 Contribution margin per unit = (30 - 21 - 1.5) = 7.50 Note-3: 450,000 / (100% - 25% tax rate) = 600,000
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