alysis (17 marks) Lexie Enterprises Ltd. has estimated the following costs for producing and selling 100 product: 3 4 5 6 S 7 8 20.000 4000 Current production and sales in units Selling price per unit Total costs: Direct materials Direct labor Variable overhead Variable selling and administrative expenses Fixed overhead Fixed selling and administrative expenses O 1 $ 80.000 S 100,000 30.000 $ 60,000 $ 240,025 $ 180.000 2. 3 a) Calculate the following: (1 mark each = 5 marks total) Total fixed costs Total variable costs Variable cost per unit LS Total variable costs 17 Variable cost per unit 18 Contribution margin per unit 19 Breakeven point in units b) Assume the the company would like an after tax profit of $150,000 and is subject to a ta 20 40%. (2 marks) 21 22 Desired profit after taxes (desired net income) 150,000 23 Tax rate 40% 24 25 Calculate the following: (1 mark each) 26 Desired before-tax profit (desired operating income) Units to sell to produce a profit of $150,000 after taxes 27 28 he company would like an after tax profit of $150,000 and is subject to a tax rate of 40%. (2 marks) 20 21 22 23 24 Desired profit after taxes (desired net income) Tax rate Is 150,000 40% 25 Calculate the following: (1 mark each) 26 Desired before-tax profit (desired operating income) 27 Units to sell to produce a profit of $150,000 after taxes 28 29 c) Refer to the original data. (7 marks) 0 The company is trying to improve profit and is considering two options: 1 Option 1. Increase selling price by $1.00. Assume there is no change to how many units are sold, 2 variable costs or fixed costs. Only selling price per unit changes from the original data. c) Refer to the original data. (7 marks) The company is trying to improve profit and is considering two options: 0 1 Option 1. Increase selling price by $1.00. Assume there is no change to how many units are variable costs or fixed costs. Only selling price per unit changes from the original data OR Option 2. Refer back to original data (this is independent of Option 1). Increase the number of units sold by 5% by spending $10,000 on an advertising campaign. There is no change to selling price and variable cost per unit, use the original data for these, only sales quantity and foed costs change from the original data. Answer the following: $1.00 Option 1: Increase selling price by How much is the contribution margin per unit if the selling price is increased (1 mark) Formulas 39 Option 1: Increase selling price by How much is the contribution margin per unit if the selling price is increased (1 mark) What will operating income be if this option is selected? (1 mark) $1.00 40 41 42 43 Option 2: Increase sales volume by Amount spent on advertising campaign $ 520 10,000 44 How many units are sold at this new sales level? (1 mark) 45 How much are fixed costs in total if this option is selected? (1 mark) What will operating income be if this option is selected (1 16 mark)? 7 3 Which option should be chosen? (1 mark) d) Assume the company had a margin of safety last year of 10,000 units and this year the main of safety is 8,000 units. Which margin of safety would the company prefer? Why? What does magna safety mean (what does 8,000 units margin of safety mean)? Explain in a way that a non accountant could understand? (3 marks) Margin of safety (in units) - last year 10,000 Margin of safety (in units) - this year 8,000 53 54 55 56 7 8 More preferable margin of safety for company? (1 mark) Explanation (2 marks)