1. Newell Corporation has provided you with the following financial data: Variab
ID: 2410963 • Letter: 1
Question
1. Newell Corporation has provided you with the following financial data: Variable costs per unit Selling price per unit Total fixed costs Tax rate Non cash expenses $ 450 $ 600 $1,800,000 .50 $300,000 Required: a. Compute the break-even point in units. b. Compute the break-even volume in dollars. c. Compute the target sales volume in units assuming a targeted net income before taxes of $ 225,000. Compute the target sales volume in dollars assuming a targeted net income after taxes of $ 300,000 d. e. Compute break even on a cash basis.Explanation / Answer
Requirement a.
Break even point in Units
= Fixed costs / Contribution per unit
= 1,800,000/(600-450)
= 12,000 units
Requirement b
Break even volume in sales
= 12,000*600
= $7,200,000
Requirement c.
Target net income before taxes = $225,000
Total Fixed costs =$1,800,000
Required contribution =$2,025,000
Contribution per unit = $ 150 per unit
Target sales volume in units = 13,500 units
Requirement d.
Target net income before taxes = $600,000
(300,000 /0.5)
Total Fixed costs = $1,800,000
Required contribution = $2,400,000
Contribution per unit =$150 per unit
Targeted sales volume in units =16,000 units
Targeted sales volume in dollars = 16000*600
=$9,600,000
Requirement e.
Break even on cash basis
= (Fixed costs - non cash expenses ) / Contribution per unit
=(1,800,000 - 300,000) / 150
= 10,000 units
In dollars = 10,000*600 =$6,000,000
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