Question

A firm produces and sells a product with a contribution margin of $32 per unit. The firm is presently selling 90,000 units and earning $320,000 in pre-tax income. If the firm desires to increase its pre-tax income to $ 400,000, how many more units must it sell?

Answer #1

Total contribution margin = contribution margin per unit * total units

= $ 32 Per Unit * 90,000 Units

= $ 2,880,000

Pre Tax Income = $ 320,000

Hence Fixed Cost = Total contribution margin - Pre Tax Income

= $ 2,880,000 - $ 320,000

= $ 2,560,000

pre-tax income required = $ 400,000

Total contribution margin required = Total Fixed Cost + pre-tax income required

= $ 2,560,000 + $ 400,000

= $ 2,960,000

Units to be Sold = Total contribution margin required / Total contribution margin Per Unit

= $ 2,960,000 / $ 32

= 92,500 units

hence the correct answer is **92,500 units**

A firm manufactures a product that sells for $12 per unit.
Variable cost per unit is $8 and fixed cost per month is $1200.
Capacity is 1000 units per month. a. How much is the contribution
margin? __________ b. How much is the contribution rate?
___________ c. How many units must they sell per month in order to
break even? _________ d. How many units must they sell in order to
have a profit of $2,500 per month? ___________

PROBLEM 3 – Contribution Margin Income Statement
Brooks Company manufactures a product that sells for $50 per unit.
Brooks incurs a variable cost per unit of $35 and $2,400,000 in
total fixed costs to produce this product. It is currently selling
200,000 units.
Instructions: Complete each of the following requirements:
(b) Compute the contribution margin per unit and contribution
margin ratio.
(c) Compute the break-even point in units.
(d) Compute the break-even point in dollars.
(e) Compute the number of...

1. A company's product sells for $150 and has variable
costs of $60 associated with the product. What is its contribution
margin per unit?
a. $150
b. $90
c. $60
d. $40
2. A company's contribution margin per unit is $25. If
the company increases its activity level from 200 units to 350
units, how much will its total contribution margin
increase?
a. $1,250
b. $8,750
c. $3,750
d. $5,000
3. If a company has fixed costs of $6,000 per...

A
product sells for $170 per unit, and its variable costs per unit
are $100. The fixed costs are $540,000. If the firm wants to earn
$40,000 after tax income (assume a 15% tax rate), how many units
must be sold? After, prove the amount of units by plugging it back
in to find the $40,000 (pre and post 15% tax rate).

Q97. If a firm has a break-even point of 20,000 units and the
contribution margin on the firm's single product is $4.00 per unit,
what will the firm's EBIT (operating profit) be at sales of 30,000
units?
Q98A. A company currently sells for $100 a product that has a
variable cost per unit of $48. Fixed costs are $910,000 and not
expected to change in the next period. If the company desires to
reduce its break-even point by 1,250 units,...

A company sells Product X for $30 per unit. The Direct Material
Cost, Direct labor cost, and Variable MFO costs total $21 per unit.
Fixed costs to product the product are $135,000.
How many units of Product X must the company sell in order to
break even?
What is the contribution margin ratio for product X?
How many units of Product X must be sold in order for the
company to earn a $50,000 profit?
If the company was selling...

In Zhuang LTD , data concerning two products are Contribution
margin per unit—Product A $10, Product B $12; machine hours
required for one unit—Product A 2, Product B 3.
a) Calculate the contribution margin per unit of the limited
resource for each product:
Product A: $ Answer per hour
Product B: $ Answer per hour
b) If Zhuang LTD has a limited number of machine hours and can sell
all the units produced of either product, which product should it...

In Zhuang LTD , data concerning two products are Contribution
margin per unit—Product A $10, Product B $12; machine hours
required for one unit—Product A 2, Product B 3.
a) Calculate the contribution margin per unit of the limited
resource for each product:
Product A: $ Answer per hour
Product B: $ Answer per hour
b) If Zhuang LTD has a limited number of machine hours and can sell
all the units produced of either product, which product should it...

1.
Wang Co. manufactures and sells a single product that sells for
$540 per unit; variable costs are $324 per unit. Annual fixed costs
are $836,000. Current sales volume is $4,290,000. Compute the
contribution margin per unit.
2.
A firm expects to sell 24,800 units of its product at $10.80 per
unit and to incur variable costs per unit of $5.80. Total fixed
costs are $68,000. The total contribution margin is:
3.
McCoy Brothers manufactures and sells two products, A...

Nice Corporation produces and sells a single product. Data
concerning that product appear below:
Per Unit
Percent of Sales
Selling price
$
260
100
%
Variable expenses
65
25
%
Contribution margin
$
195
75
%
Fixed expenses are $180,000 per month. The company is currently
selling 1,300 units per month.
Required:
Management is considering using a new component that would
increase the unit variable cost by $54. Since the new component
would improve the company's product, the marketing manager...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 35 minutes ago

asked 46 minutes ago

asked 49 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago