The statement of income for Dimmell Co. presented below represents the operating results for the fiscal year just ended. Dimmell had sales of 1.800 tons of product during the current year, The manufacturing capacity of Dimmell's facilities is 3,000 tons of product.Dimell plans to market its product in a new territory Dimmell estimates that an advertising and promotion program costing $81,500 annually would need to be undertaken for the next 2 or 3 years In addition, a $25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Dimell's current after-t income of $94.500?
Answer(s): A
Given that $61,500 is required for advertising and promotion, these are fixed costs that will have to be covered by the CM for sales in the new market of $200 each. The UCM for regular sales was $225 ($500 selling price x 45%), and there is a $25 additional variable commission expense for sales in the new territory. The 45% CM is computed by dividing the $405,000 CM by the $900,000 of sales. Thus, the new unit contribution of $200 is divided into $61,500 of incremental fixed costs, resulting in additional sales from the new program of 307.5 tons at the breakeven point.
The statement of income for Dimmell Co. presented be represents the operating results for me fiscal year just ended. Dirnmell had sales of 1.800 tons of product during the current year the manufacturing capacity of Dimmells facilities is 3000 tons of products.Dimmell is considering replacing a highly labor intensive process with an automatic machine. This would result in an increase of $58,500 annually in manufacturing fixed costs The variable manufacturing costs would decrease $25 per ton The new breakeven volume in tons would be?
Answer(s): B
The new manufacturing fixed cost would be $306,000. The new contribution margin would be $250 per (ant, which is the old contribution margin of $225 plus the $25 of variable cost savings per ton. Thus, the new breakeven point would be $306,000 of fixed costs divided by the new $250 contribution margin per wit, or
The statement of income for Dimmell Co presented below represents the operating results for the fiscal year just ended Dimmell had sales of 1,800 tons of product during the current year the manufacturing capacity of Dimmell's facilities is 3,000 tons of productIgnore the facts presented in ar other question and now assume Dimell estimates that the per ton selling price would decline 10% next year variable costs would increase $40 per ton and the fixed costs would not change What sales volume in dollars would be required to earn an atter4ax net income of $94500 next year
Answer(s): D
The selling price per unit will decrease from $500 to $450. The unit variable costs will increase from $275 to $315. Also, $157,500 of pretax profit is required to obtain $94,500 ÷ of after-tax profit [$94,500 (1.0--40% tax rate)]. Thus, the number of units to be sold equals 3,000 [($247,500 FC + $157,500 pretax profit) ÷ ($450 --$315) UCM] multiplying 3,000 by the selling price of $450 results in $1 .350,000 of sales.
Tonykinn Company is contemplating marketing a new product. Fixed costs will be $800000 for production of 75.000 units or less and $1 .200.000 if production exceeds 75,000 units The variable cost ratio is 60% for the first 75,000 units. Variable costs will decrease to 50% of sales for units in excess of 75.000. If the product is expected to sell for $25 per unit, how many units must Tonykinn sell to break even?
The BEP in units is equal to fixed cost divided by the difference between unit selling price and `unit variable cost (the unit contribution margin) At less than 75,000 units, fixed costs are $800,000 and UCM is $10 [$25 --($25 x 60%)]. At this UCM. 80.000 units ($800,000 + $10) must be sold, but this volume is not within the relevant range. At any production level greater than 75,000 units, total fixed costs are $1,200,000 but there are two UCM layers The first 75,000 units sold will produce a contribution margin of $750.000 (75.000 x $10). Hence, another $450,000 ($1,200,000 --$750,000) must be contributed The IJCM is $1250 [$25 --($25 x 50%)] for units in excess of 75,000, :and 36,000 ($450,000 ÷ $12.50) additional units must be sold. Total unit sales at the SEP are 111,000(75.000 + 36.000). --
The Childers Company sells widgets. The company breaks even at an annual sales volume of 75.000 units Actual annual sales volume was 100,000 units, and the company reported a profit of $200,000. The annual fixed costs for the Childers Company are
The profit increased by $200,000 and the sales volume increased by 25,000 units from the BEP. This increase in profit is a result of an increase in the contribution margin (sales - variable costs). Unit contribution margin is $8 ($200,000 ÷ 25.000 units). The SEP in units is equal to fixed costs divided by the IJCM.
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