Exercise 179 (Part Level Submission) Webber, Inc, developed the following inform
ID: 2551895 • Letter: E
Question
Exercise 179 (Part Level Submission) Webber, Inc, developed the following information for its product Sales price Variable cost Contribution margin Total fixed costs Per Unit $90 63 $27 $1,215,000 Answer the following independent questions. How many units must be sold to break even? Number of units to be sold What is the total sales that must be generated for the company to earn a profit of $60,000? Total sales $ If the company is presently selling 50,000 units, but plans to spend an additional $108,000 on an advertising program, how many additional units must the company sell to earn the same net income it is now making? Additional units unit variable cost is increased by io and total edc sts are creased by $236 50 (Round Using the original data in e problem, compute a new break even point in units if the unit sales price is increased 209 down your answer to whole unit, e.g. 15,o00.) New break-even pointExplanation / Answer
Answer
A.
Break even sales in units = Fixed cost/ contribution per unit
=1215000/27
=45000 units
B.
Total sales to be generated for the company to earn a profit of $60000:
Profit = sales -Veriable cost -fixed cost
60000 =sales-(45000*63)-1215000
Sales =2835000+1215000+60000
Sales =411000
C.
Net income = contribution -fixed costs
=(50000units*$27)-1215000
=135000
Additional units to be sold if additional cost on advestising program is incurred:
=Fixed cost+advestising costs+Desired profit / Contribution per unit
=1215000+108000+135000 / 27
=54000units
Additional units to be sold = 54000-50000
=4000units
D.
New break even point in units as follows:
Increase in unit sales price = $90*120% =$108
Increase in unit variable cost =$63*110% =$69.30
Increase in fixed costs =1215000+236250 =$1451250
Contribution per unit =sales -veriable cost = 108 - 69.30 =38.70
New break even point = fixed cost/fixed cost
=1451250/38.70
=37500units
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