Gannon Company sells a single product for $15 per unit. Variable costs are $10 per unit and fixed costs are $180,000 at an operating level of 16,000 to 30,000 units.
a. What is Gannon Company's break-even point in units?answer
b. How many units must be sold to earn $20,000 before income tax? answer
c. How many units must be sold to earn $30,000 after income tax, assuming a 40% tax rate? Answer
Requirement a
Answer-------36000 units
Working
| A | Sale Price per unit | $ 15.00 |
| B | Variable Cost per Unit | $ 10.00 |
| C=A x B | Unit Contribution | $ 5.00 |
| D | Total Fixed cost | $ 180,000.00 |
| E=D/C | Break-even point in units | 36000.00 |
.
Requirement b
Answer-------Units to sell to earn $20000 income = 40,000 units
Working
| A | Sale Price per unit | $ 15.00 |
| B | Variable Cost per Unit | $ 10.00 |
| C=A x B | Unit Contribution | $ 5.00 |
| D | Total Fixed cost Plus desired income | $ 200,000.00 |
| E=D/C | Units to sell to earn $20000 income | 40000.00 |
..
.
Requirement c
Answer---------46000 units to earn $30000 income after tax
Working
| Income after income tax | $ 30,000.00 |
| Income tax rate | 40% |
| Income before tax (30000/60% x 100%) | $ 50,000.00 |
.
| A | Sale Price per unit | $ 15.00 |
| B | Variable Cost per Unit | $ 10.00 |
| C=A x B | Unit Contribution | $ 5.00 |
| D | Total Fixed cost Plus desired income | $ 230,000.00 |
| E=D/C | Breakeven point in units | 46000.00 |
Get Answers For Free
Most questions answered within 1 hours.