Positive operating income is shown on a cost-volume-profit chart when the
Answer(s): D
A cost-volume-profit chart contains elements (lines, points, axes) that identify variable cost, fixed cost, the breakeven point, total revenue, profit, and volume in units. When the total sales revenue line rises above the total expense line, a company will have positive net income.
Romashka, Inc. plans to introduce a new product. The marketing manager forecasts a unit selling price of $500. The variable cost per unit is estimated to be $100. In addition1 there is a total of $110,000 fixed indirect manufacturing costs, and $150000 in fixed operating costs associated with these units. What quantity will the company have to sell to break even?
The breakeven point in units is determined as follows:
Associated Supply, Inc. is considering introducing a new product that will require a $250,000 investment of capital. The necessary funds would be raised through a bank loan atan interest rate of 8%. The fixed operating costs associated with the product would be $122,500, while the contribution margin percentage would be 42%. Assuming a selling price of $15 per unit, determine the number of units (rounded to the nearest whole unit) Associated would have to sell to generate earnings before interest and taxes (EBIT) of 32% of the amount of capital invested in the new product.
Answer(s): B
Associated has determined it must generate EBIT equal to 32% of the capital invested in this project, or $80,000 ($250,000 x 32%). The number of units it must produce to achieve this level of EBIT can be derived as follows:
Delphi Company has developed a new project that will be marketed for the first time during the next fiscal year. Although the Marketing Department estimates that 35,000 units could be sold at $36 per unit, Delphi's management has allocated only enough manufacturing capacity to produce a maximum of 25,000 units of the new product annually. The fixed costs associated with the new product are budgeted at $450,000 for the year, which includes $60,000 for depreciation on new manufacturing equipment. Data associated with each unit of product are presented as follows Delphi is subject to a40% income tax rate. The number of units of the new product that Delphi Company must sell during the next fiscal year in order to break even is
Answer(s): C
The breakeven point in units equals fixed costs divided by the unit contribution margin (in 1dollars). The unit contribution margin is $20 ($36 selling price --$16 unit variable cost). Hence, the breakeven point equals 22,500 units ($450,000 ÷ $20).
Delphi Company has developed a new project hat will be marketed for the first time during the next fiscal year. Although the Marketing Department estimates that 35,000 units could be sold at $36 per unit, Delphi's management has allocated only enough manufacturing capacily to produce a maximum of 25,000 units of the new product annually. The fixed costs associated with the new product are budgeted at $450,000 for the year, which includes $60,000 for depreciation on new manufacturing equipment. Data associated with each unit of product are presented as follows. Delphi is subject to a40% income tax rate.The maximum after-tax profit that can be earned by Delphi Company from sales of the new product during the next fiscal year is
Answer(s): A
Delphi Company has developed a new project that will be marketed for the first time during the next fiscal year. Although the Marketing Department estimates that 35,000 units could be sold at $36 per unit, Delphi's management has allocated only enough manufacturing capacity to produce a maximum of 25,000 units of the new product annually. The fixed costs associated with the new product are budgeted at $450,000 for the year, which includes $60,000 for depreciation on new manufacturing equipment. Data associated with each unit of product are presented as follows. Delphi is subject to a 40% income tax rate.
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