I need a step by step answer to the following accounting problem. ACC 512 Multip
ID: 2543844 • Letter: I
Question
I need a step by step answer to the following accounting problem.
ACC 512 Multiproduct CVP Analysis with income taxes Case
Jan Green is preparing a business plan to present to her local bank. She provides with the following selected information from her business Hightway 37 Stores:
Products
A
B
C
D
Selling price per unit
$20.00
$50.00
$28.00
$10.00
Units sold
1,000
500
1,500
2,000
Variable cost per unit
$10.00
$25.00
$14.00
$5.00
Total fixed costs
$1,605.00
Combined federal and state income tax rate
40%
Desired net income
$2,568.00
Compute the number of units of products A, B, C, and D required to earned the desired after tax profit. Products can only be sold in whole units, therefore round your answers to the nearest whole unit.
Jan Green is preparing a business plan to present to her local bank. She provides with the following selected information from her business Hightway 37 Stores:
Products
A
B
C
D
Selling price per unit
$20.00
$50.00
$28.00
$10.00
Units sold
1,000
500
1,500
2,000
Variable cost per unit
$10.00
$25.00
$14.00
$5.00
Total fixed costs
$1,605.00
Combined federal and state income tax rate
40%
Desired net income
$2,568.00
Compute the number of units of products A, B, C, and D required to earned the desired after tax profit. Products can only be sold in whole units, therefore round your answers to the nearest whole unit.
Explanation / Answer
Desired Profit after tax 2568 Tax Rate 40% Desired Profit Before tax 4280 (2568/(1-40%) Fixed Cost 1605 Total Required Contribution Margin 5885 Contribution Margin ratio 50% Sales Level 11770 Ranking of Product basis CM Ratio: Products A B C D Selling Price 20 50 28 10 Less: VC 10 25 14 5 Contribution Margin 10 25 14 5 Contribution Margin ratio 50% 50% 50% 50% Company can sell any product first Units 1000 500 1500 2000 Sales Value Explanation Units Take Product A 10000 (1000*10) 1000 Take Product B 1770 (11770-10000)/25 71 70.8 Rounded off Product C - No Need taget already Acieved - Product D - No Need taget already Acieved - Total Sales Level 11770
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