Odd Wallow Drinks is considering adding a new line of fruit juices to its mercha

Question

Odd Wallow Drinks is considering adding a new line of fruit juices to its merchandise products. This line of juices has the following prices and costs:

Compute Odd Wallow Drinks's break-even point in units per year. (Round up your answer to the nearest whole unit.)

How many cases must Odd Wallow Drinks sell to earn $1,800,000 per year after taxes on the juice?(Round up your answer to the nearest whole number.)

Odd Wallow Drinks is considering adding a new line of fruit juices to its merchandise products. This line of juices has the following prices and costs:

Explanation / Answer

Selling price per case (24 bottles) of juice $ 50

Variable cost per case (24 bottles) of juice $ 24

So COnt pu = 50-24 = 26

Fixed costs per year associated with this product $ 8,150,000

Income tax rate 40 %

Required:

(a)

Compute Odd Wallow Drinks's break-even point in units per year. (Round up your answer to the nearest whole unit.)

BEP = Fixed cost/ Cont pu = 8150000/26 = 313,462 units

(b) How many cases must Odd Wallow Drinks sell to earn $1,800,000 per year after taxes on the juice?(Round up your answer to the nearest whole number.)

Profit after Tax = 1800,000

Tax rate is 40%

So Profit before tax = 1800000/(1-40%) = $3,000,000

So We have Total COnt -Fixed cost = Profit before tax

ie COnt Pu*No of Units - 8150000 = 3000000

ie No of Units = (3000000+8150000)/26 = 428,846 cases

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