1 answer

Exercise 5-14 Break-Even and Target Profit Analysis (LO5-3, LO5-4, LO5-5, LO5-6) 12.5 points Lindon Company is...

Question:

Exercise 5-14 Break-Even and Target Profit Analysis (LO5-3, LO5-4, LO5-5, LO5-6) 12.5 points Lindon Company is the exclusive
Exercise 5-14 Break-Even and Target Profit Analysis (LO5-3, LO5-4, LO5-5, LO5-6) 12.5 points Lindon Company is the exclusive distributor for an automotive product that sells for $42.00 per unit and has a CM ratio of 30%. The company's fixed expenses are $264,600 per year. The company plans to sell 24.400 units this year. 8 04:00 Required: 1. What are the variable expenses per unit? (Round your per unit" answer to 2 decimal places.) 2. What is the break even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $138.600 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.20 per unit. What is the company's new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $138600? eBook 1. Variable expense per unit 2 Break even point in units Break-even point in dollar sales 3. Unit sales needed to attain to profit Dollar sales needed to attain target profit 4. New break-even point in unit sales New break even point in dolar sales Dollar salos needed to attain target profit

Answers

Answer:

Here, CM ratio is Contribution Margin ratio i.e., 30%

Selling Price per unit is $42

Total fixed expenses are $264,600

1. Calculation of variable cost per unit

Contribution Margin ratio = [(Sale Price per unit - Variable cost per unit) / Sale Price per unit ]

                   30%     = [($42 - Variable cost per unit) /$42]

               0.3 * $42     = $42 - Variable cost per unit

                  $12.6      = $42 - Variable cost per unit

   Variable cost per unit = $42 - $12.6 = $29.4 per unit

2. Break-even Sales

Break-even Sales (Units) = Fixed Cost / Contribution margin per unit

Here, Contribution margin per unit = Sale Price per unit - Variable cost per unit = $42 - $29.4 = $12.6 per unit

Break-even Sales (Units) = Fixed Cost / Contribution margin per unit

                                    = $264,600 / $12.6

                                    = 21,000 units

Break-even Sales (Dollars) = Fixed Cost / Contribution margin ratio

                                        = $264,600 / 30%

                                        = $882,000

3. Target profit of $138,600

Units to be sold to attain targeted profit of $138,600 = [(Fixed cost + Targeted Profit) / Contribution margin per unit]

                                                                           = [($264,600 + $138,600) / $12.6]

                                                                           = $403,200 / $12.6

                                                                           = 32,000 units

Sales (Dollars) to attain targeted profit of $138,600 = [(Fixed cost + Targeted Profit) / Contribution margin ratio]

                                                                          = [($264,600 + $138,600) / 30%]

                                                                          = $403,200 / 30%

                                                                          = $1,344,000

4. If variable cost is reduced by $4.2 per unit

Earlier Variable cost per unit = $29.4

Revised Variable cost per unit = $29.4 - $4.2 = $25.2 per unit

Revised Contribution margin per unit = Sale Price per unit - Variable cost per unit = $42 - $25.2 = $16.8 per unit

Revised Contribution margin ratio = [(Contribution margin per unit) / Sale price per unit] * 100

                                                 = ($16.8 / $42) * 100

                                                 = 0.4 or 40%

Break-even Sales (Units) = Fixed Cost / Contribution margin per unit

                                     = $264,600 / $16.8

                                     = 15,750 units

Break-even Sales (Dollars) = Fixed Cost / Contribution margin ratio

                                       = $264,600 / 40%

                                        = $661,500

Units to be sold to attain targeted profit of $138,600 = [(Fixed cost + Targeted Profit) / Contribution margin per unit]

                                                                           = [($264,600 + $138,600) / $16.8]

                                                                           = $403,200 / $16.8

                                                                           = 24,000 units

Sales (Dollars) to attain targeted profit of $138,600 = [(Fixed cost + Targeted Profit) / Contribution margin ratio]

                                                                          = [($264,600 + $138,600) / 40%]

                                                                          = $403,200 / 40%

                                                                          = $1,008,000

1 Variable Expense per unit $29.4
2 Break-even Point in units 21,000
Break-even Point in dollar sales $882,000
3 Unit Sales needed to attain target profit 32,000
Dollar Sales needed to attain target profit $1,344,000
4 New break-even point in unit sales 15,750
New break-even point in dollar sales $661,500
Dollar Sales needed to attain target profit $1,008,000

                                    

.

Similar Solved Questions

1 answer
Seaborn Co. has identified an investment project with the following cash flows. Year Cash Flow 1...
Seaborn Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $850 2 1,020 3 1,340 4 1,200 Required: (a) If the discount rate is 11 percent, what is the present value of these cash flows? (b) What is the present value at 16 percent? (c) What is the present value at...
1 answer
Instructions: In this scenario you have been hired by the World Health Organization. As a leader...
Instructions: In this scenario you have been hired by the World Health Organization. As a leader in the organization you have been assigned to assess a small developing nation and determine the most cost effective public health solutions to improve overall health in the country. You need to select p...
1 answer
7 Student Council President Elections from "Student Counal President Elections Two candidates, A and B, are...
7 Student Council President Elections from "Student Counal President Elections Two candidates, A and B, are running for the president of student counail. At the Based on the results of the simulation, how likely is it that the newspaper's moment, candidate A thinks that each candidate has th...
1 answer
Katie is willing to pay $3 for a pound of apples. She buys 2 pounds of...
Katie is willing to pay $3 for a pound of apples. She buys 2 pounds of apples for $2 per pound. The lowest price the seller would accept is $1.50 per pound. How much value is created as a result of this trade?...
1 answer
2. Find the total surface area of the solid below. The solid is composed of a...
2. Find the total surface area of the solid below. The solid is composed of a rectangular prism with a cylinder-shaped cutout in the middle. Total surface area =...
1 answer
In New York, for one year Estimate the amount of natural gas used, in ft/day. To...
in New York, for one year Estimate the amount of natural gas used, in ft/day. To hea from the following data: Winter design heat loss = 120,000 Btu/hr • Design indoor temperature - 70PF • Design outdoor temperature - 10°F • Thermostat setting - 68°F Continuous internal gains o...
1 answer
You decided to save money for a travel to Barcelona in two years. You decided to...
You decided to save money for a travel to Barcelona in two years. You decided to open a savings account and make equal monthly deposits for the next two years. You think that you need to save $5,000. You checked a few banks to find out the best savings account and identified one, the APR of which is...
1 answer
Question: Consider the following errors that could be made when running TLC
Question: Consider the following errors that could be made when running TLC. Indicate what should be done to correct the error. A. A two-component mixture containing 1-octene and 1,4-dimethylbenzene gave only one spot with an Rf value of 0.95. The solvent used was acetone. In my researches, I found...
1 answer
A doctor prescribes 125 milligrams of a therapeutic drug that decays by about 30% each hour. Exponential modelling problem?
a) To the nearest hour, what is the half-life of the drug? I have the general form of an exponential function, I'm not sure how to use this to solve for the half life though. b) Write an exponential model representing the amount of the drug remaining in the patient’s system after t hours. ...
1 answer
True or False? You are providing care for a 40-year-old female who fell through a plate...
True or False? You are providing care for a 40-year-old female who fell through a plate glass window. The victim sustained a large wound to her left abdomen and it appears that her abdominal contents are protruding out. You should cover the wound with moist dressings....
1 answer
Def gradient_descent(feature_matrix, label, learning_rate = 0.05, epoch = 1000): """ Implement gradient descent algorithm for regression....
def gradient_descent(feature_matrix, label, learning_rate = 0.05, epoch = 1000): """ Implement gradient descent algorithm for regression.    Args: feature_matrix - A numpy matrix describing the given data, with ones added as the first column. Each row represents a single data p...
1 answer
Two beakers are placed in a small closed container at 25 °C. One contains 459 mL...
Two beakers are placed in a small closed container at 25 °C. One contains 459 mL of a 0.110 M aqueous solution of NH2CONH2 the second contains 263 mL of a 0.258 M aqueous solution of NH2CONH2. Small amounts of water evaporate from both solutions. As time passes, the volume of solution in the sec...
1 answer
The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is...
The comparative balance sheet of Yellow Dog Enterprises Inc. at December 31, 20Y8 and 20Y7, is as follows: 1 Dec. 31, 20Y8 Dec. 31, 20Y7 2 Assets 3 Cash $145,630.00 $180,110.00 4 Accounts receivable (net) 224,520.00 241,890.00 5 Inventories 321,860.00 2...
1 answer
Question 3: For the below circuit, given that Rs=201, a=0.3, RL=250N. RA 1,(t) a: 1 iz(t)...
Question 3: For the below circuit, given that Rs=201, a=0.3, RL=250N. RA 1,(t) a: 1 iz(t) + + V (t) R IR, Answer the following questions a. If V2(t) = 110cos (250t) v calculate v1 b. Calculate the input impedance R1 C. Calculate the currents 11 and 12 d. Calculate the value of Vs...
1 answer
Chapter 12 H.W. Begin Date: I 00.00 AMDe Date 00 PM End Date (20%) Problem 5:...
Chapter 12 H.W. Begin Date: I 00.00 AMDe Date 00 PM End Date (20%) Problem 5: Hoover Dam on the Colorado River nde baghest dn.n the United States at 221m, with a power output of 680 MW The dam generates electricity by flowing water down to a poust 150 m below the stop, at an average flow rate of 65o...