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How many Tuff-Pups must be sold break even? 2. If Reagan wants to earn $95, 900 in profit, how many Tuff-Pups must be sold? Prepare a variable-costing income statement to verify your answer. 3. Suppose that Reagan would like to lower the brake-even units to 12,000. The company does not believe that the price or fixed cost can be changed. Calculate the new unit variable cost that would result in break-even units of 12,000. (Round to the nearest cent.) 4. What is Reagan's current contribution margin and operating income? Calculate the degree of operating leverage (round your answer to four decimal places.) If sales increased by 10 percent next year. what would the percent change in operating income be? What would the new total operating income for next year be? Jonah Graham owns and operates The Green Thumb Company (GTC), which provides live plants and flower arrangements to profession offices. Jonah has fixed costs of $3, 240 per month for office/greenhouse rent, advertising, and a delivery van. Variable costs for the plants, fertilizer, pots, and other supplies average $24 per job. GTC charges $60 month for the average job. 1. How many jobs must GTC average each month to break even? 2. What is the operating income for GTC in a month with 88 jobs? With 93 jobs? 3. Jonah faces a tax rate equal to 25 percent. How many jobs must Jonah have per month to earn an after-tax income of $1, 200? (Round your answer to whole units.) 4. Suppose that Jonah's fixed costs increase to $3, 400 per month and he decides to increase the price to $75 per job. What is the new break-even point in number of jobs month (Round your answer to the nearest whole number of jobs.) Big Red Motors, Inc., employs 15 sales personnel to market its line of luxury automobiles. The average car sells for $75,000, and a 6 percent commission is paid to the salesperson. Big Red Motors is considering a change to the commission arrangement where the company would pay each salesperson a salary of $1, 600 per month plus a commission of 2 percent of the sales made that salesperson. What is the amount of total monthly car sales at which Big Red Motors should be indifferent as to which plan to select? (CMA adapted)
