chapter 20 problem 3

Chase Co. sells headbands to retailers for $5. The variable cost of goods sold per headband is $1, with a selling commission of 10%. Fixed manufacturing costs total $25,000 per month, while fixed selling and administrative costs total $10,500. The income tax rate for Chase Co. is 30%.

Required:

1) What is the breakeven point in headbands?

2) What are target sales in headbands to generate a before tax income (operating income) of $3,000?

3) What are target sales in headbands to generate an after tax income (net income) of $3,080?

4) What is net income, assuming Chase sells a total of 15,000 headbands?