Explain and show work Finch Manufacturing Company reported the following data re

Question

Explain and show work

Finch Manufacturing Company reported the following data regarding a product it manufactures and sells. The sales price is $44 Variable costs Manufacturing Selling 14 per unit per unit Fixed costs Manufacturing Selling and administrative $152,000 per year $168,000 per year Required a. Use the per-unit contribution margin approach to determine the break-even point in units and dollars. b. Use the per-unit contribution margin approach to determine the level of sales in units and dollars required to obtain a profit of $175,000 C. Suppose that variable selling costs could be eliminated by employing a salaried sales force. If the company could sell 21,200 units, how much could it pay in salaries for salespeople and still have a profit of $175,000? (Hint: Use the equation method.) a. Break-even point in units reak-even point in dollars b. Required sales in units Required sales in dollars c. Fixed cost of salaries

Explanation / Answer

a)contribution per unit =price- variable cost

             = 44-14-5

            = 25 per unit

Contribution margin ratio = contribution /sales

            = 25 /44

              = .56818

Fixed cost = 152000+168000=320000

BEP(unit) =Fixed cost /contribution per unit

             = 320000/25

            = 12800 units

BEP($) =fixed cost /CM ratio

      = 320000/.56818

        = $ 563201 [rounded to 563200]

     

b)Target unit sales = [fixed cost +target profit ]/contribution per unit

       =[320000+175000]/25

        = 19800 units

Required sales in $ =[fixed cost +target profit ]/contribution margin ratio

          = [320000+175000]/.56818

         = $ 871202   [rounded to 871200]

c)Let salaries of sales force be "X" .Fixed cost = 320000+x

Profit = [units * (price- variable manufacturing cost )] -fixed cost

175000    = [21200 (44-14)] - (320000+x)

175000 = [21200*30] - [320000+x]

175000 = 636000- 320000-x

x = 636000-320000-175000 = 141000

salaries of sales force = $ 141000

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.