Question
Breeze Inc. produces air conditioner covers. Each cover sells for $9. Currently, the company produces and sells 300,000 cover units per year. The tax rate
Breeze Inc. produces air conditioner covers. Each cover sells for $9. Currently, the company produces and
sells 300,000 cover units per year. The tax rate for the company is 25%. The company has the following costs:
Direct materials per unit $ 2.00
Direct labour per unit 1.00
Variable manufacturing overhead per unit 0.50
Variable selling expenses per unit 0.10
Total variable costs per unit $ 3.60
Total fixed manufacturing expenses $ 388,800
Required (14 marks)
a. Compute the unit contribution margin and the contribution margin percentage for Breeze. (2 marks)
b. Calculate the break-even point in units for Breeze using the contribution margin, and calculate the breakeven
point in sales dollars using the contribution margin percentage. (3 marks)
c. In order for Breeze to earn $86,400 of before-tax profits, how many cover units will it have to sell? (3 marks)
d. In order for Breeze to earn $81,000 after taxes, how many cover units will it have to sell? (3 marks)
e. If the fixed manufacturing costs of the firm increased by $15,120, how many units would the company need
to sell to break even? (3 marks)
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