Question

8 134,400 A company produces a product for sale at $24 per unit. Total fixed costs are $48,000 and variable costs per unit are $12. The number of units to be produced and sold to obtain a $14,400 net income when the income tax rate is 25% would be: $12 lunit A 1,000 B 7.500 67,200 C. 3,000 FC 42,000 3,750 Vc/unit 12 5,600 67,200 48,000 19,200, x 25% 14400

Answer 1

8.)	Contribution margin =12 ( 24- 12 )
	Let the unit sold be Y
	Equation will be
	( 12 Y - 48,000 ) x (1-25%) = 14,400
	( 12 Y - 48,000 ) x 75% = 14,400
	9Y - 36,000 = 14,400
	9Y = 14,400 + 36,000
	9Y = 50,400
	Y= 50,400 / 9
	Y = 5,600
	Correct answer is option E . ( i.e. 5,600 ).
9.)	Break even sale '= Fixed Costs / Contribution Margin
	300,000 = Fixed Costs / ( 1 - 45% )
	300,000 = Fixed Costs / 55%
	Fixed Costs = 300,000 x 55%
	Fixed Costs = $ 165,000
	Margin of safety = Sales - Breakeven sale / Sales
	25% = Sales - 300,000 / Sales
	Sales x 25% = Sales - 300,000
	Sales - 0.25 Sales = 300,000
	0.75 Sales = 300,000
	Sales = 300,000 / 0.75
	Sales = $ 400,000
	Net income
	Net income = Contribution margin - fixed costs
	= ( 400,000 x 55% ) - 165,000
	= 220,000 - 165,000
	= $ 55,000
	Correct answer is option A . ( i.e. 55,000 ).
10.)	Degree of operating leverage = Contribution / Net income
	8 = ( 400,000 x 25%) / { ( 400,000 x 25% ) - Fixed Costs }
	8 = 100,000 / { 100,000 - Fixed Costs }
	8 x (100,000 - Fixed Costs ) = 100,000
	800,000 - 8 Fixed Cost = 100,000
	8 Fixed Costs = 800,000 - 100,000
	8 Fixed Costs = 700,000
	Fixed Costs = 700,000 / 8
	Fixed Costs = $ 87,500
	Correct answer is option C . ( i.e. $ 87,500 ).