4. Consider the following financial data for Xerox Corp. Projected Sales per mon

Question

4. Consider the following financial data for Xerox Corp. Projected Sales per month Selling Price Raw Material Assembly labor 150,000 Units $19.95 per unit S7.50 per unit $6.00 per unit $125,000 per month Marketing S19,500 per month 4a. What is the Gross Profit per unit (8 pts)? a. $12.45 b. $6.45 c. $14.95 d. $7.45 e. $8.45 f. None of the above 4b. What is the total indirect expense for the month? (8 pts) a. $142,500 b. $143,500 c. $144,500 d. $125,000 e. None of the above 4c. What is the Breakeven sales price per unit (8 pts)? a. $7.56 b. $12.45 c. $13.46 d. $14.46 e. None of the above

Explanation / Answer

a) Cost of goods sold per unit = Raw material per unit + Assembly labour per unit

= $7.5 + $6

= $13.5

Gross profit per unit = Selling price per unit - Cost of goods sold per unit

= $19.95 - $13.5

= $6.45

b. Total indirect expense for the month = Operating expenses + Marketing

= $125,000 + $19,500

= $144,500

c. Variable expenses per unit = Raw materials per unit + Assembly labour per unit

= $7.5 + $6

= 13.5

Fixed expenses = Operating expenses + Marketing

= $125,000 + $19,500

= 144,500

At the breakeven sales price, net profit will be Zero

Sales - Variable expenses - Fixed expenses = 0

(150,000 units * Sales price per unit) - (150,000 units * $12.5 per unit) - $144,500 = $0

Sales price per unit = $2,018,500 / 150,000 units

= $13.46

d. Contribution margin per unit = Sales price per unit - Variable expenses per unit

= $14.95 - $13.5

= $1.45

Breakeven volume = Fixed expenses / Contribution margin per unit

= $144,500 / $1.45

= 99,655 units

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