Question

Mount Carmel Company sells only two products, Product A and Product B. Selling price Variable cost per unit Total fixed costs Product A Product B Total $40 $50 $24 $40 $840,000 Mount Carmel sells two units of Product A for each unit it sells of Product B. Mount Carmel faces a tax rate of 30%.

REQUIREMNTS
a. what is the breakeven point in revenue given the above sales mix and tax rate
b. how many units in total would need to be sold if they desired an after- tax net income of 70000?

Answer 1

Answer A Break enen point. Producta Selling price. 40 variable cost 24 (Amountin$) Product B. 50 40 contribution. 16 10 Sales Mix 2:1. 3 Total fixed cost = 840000 let unit is ac Product contribution. units Total Contributim. A 16 200 320 (1682x) B yox (10x1x) 42 x for Break eunpoint = 422 Total cost total Remnul = 840000 x=84oooo U2 = 20000 units. A = 20 2x20000 = 40000 units. B = 30 BEP units. e. Totu 20000 units 60000 units. Break eun point in revenue 40000 units X $40=$1600000 B = 20000 units X $50 - $ 1 000 000 Total $2600000 answer Note! The income tax rete does not offect Break eunpoint. Because operating income at breakewn is zero and No Income taxs are paid at this point.

be profit after tax = $70000 Protit before tax = $70000 (!- tax) $70000 (1-0.30) 15 $ 70000 = $100000 HO No. of units fixed cost & Desired profit. weighted aug.contribution Weighted acurage contribistion = Total contribution. Total units. Product contribution. units Total contribution. A 16 B В 2 82 10 1. fo 42 3. weight aug. contribution = 42 = 14 쁨 No.of units = $840000 100000 - 67142.86 units. 14