Question

Company Y shows the following quarterly data relating to its widget line for the first quarter...

Company Y shows the following quarterly data relating to its widget line for the first quarter of 2015, for sales of 10,000 units:

Net income $80,000

Tax Rate 35%

CM Ratio 45%

Fixed Costs $100,000

I need to find Sales, VC, and CM from the given information. Please explain how you find it.

Thanks in advance!

Business   Accounting   
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Homework Answers

Answer #1

Sales =

(Total fixed cost + ( targeted income/(1-tax rate))) ÷ CM ratio

=(100000 + ( 80000 /(1-0.35)) )÷ 45%

= (100000 + (80000/ 0.65))÷ 45%

= (100000 + 123077) ÷ 45%

There fore Sales = $ 495726

Sales units =

(Total fixed cost+(targeted income /(1- tax rate)))÷CM per unit

10000 = (100000 +(80000÷0.65))÷CM per unit

CM per unit = 223077÷10000 = 22.30

Therefore CM per unit = $ 22.30

Variable cost = sales - fixed cost+net income before adjustment of tax

Variable cost = 495726 - 100000 + 80000 ÷ (1-0.35)

= $ 272,650

Therefore variable cost = $ 315,726

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