Jay-Zee Company makes an in-car navigation system. Next year, Jay-Zee plans to sell 16,000 units at a

Question:

Jay-Zee Company makes an in-car navigation system. Next year, Jay-Zee plans to sell 16,000 units at a price of $320 each. Product costs include:
Direct materials ....... $68
Direct labor .......... $40
Variable overhead ....... $12
Total fixed factory overhead ... $500,000
Variable selling expense is a commission of 5 percent of price; fixed selling and administrative expenses total $116,400.
Required:
1. Calculate the sales commission per unit sold. Calculate the per unit.
2. How many units must Jay-Zee Company sell to break even? Prepare an income statement for the calculated number of units.
3. Calculate the number of units Jay-Zee Company must sell to achieve target operating income (profit) of $333,408.
4. What if the Jay-Zee Company wanted to achieve a target operating income of $322,000? Would the number of units needed increase or decrease compared to your answer in Requirement 3? Compute the number of units needed for the new target operating income.
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...