Orchid, Inc., had the following income last year, when 50,000 units were sold: Revenues $1,000,000 Variable cost
Question:
Orchid, Inc., had the following income last year, when 50,000 units were sold:
Revenues $1,000,000 Variable cost 600,000 Contribution margin $ 400,000 Fixed cost 150,000 Before-tax profit $ 250,000 Orchid currently pays its sales manager solely on commission (20% of revenues). Orchid is considering paying her a fixed salary of $80,000 instead.
Calculate the following:
a. The before-tax profit if Orchid sells 40,000 units. Stop—Check!
b. The before-tax profit if Orchid earns revenue of $600,000. Stop—Check!
c. The units Orchid needs to sell to break even. Stop—Check!
d. The revenue Orchid needs to earn to break even. Stop—Check!
e. The units Orchid needs to earn to achieve a before-tax profit of $100,000. Stop—Check!
f. The revenue Orchid needs to earn to achieve a before-tax profit of $320,000.
Stop—Check!
g. The unit sales at which Orchid would be indifferent between paying the sales manager a commission or a fixed salary. Stop—Check!
Step by Step Answer:
Mastering Managerial Accounting Key Concepts Through Problem Sets
ISBN: 9781626611184
1st Edition
Authors: Christine Denison