Cost Estimation and CVP Analysis.

REGIONAL DISTRIBUTION,INC.

Functional Income statements

For years ending December 31,2012 and 2013

2012 2013

Sales expenses.......................................................................$5,520,000 $5,000,000

cost of good sold.........................................$4,140,000 $3,750,000

Shipping........................................................215,400 200,000

Sales order processing..................................52,500 50,000

Customer relation.........................................120,000 100,000

Depreciation...................................................80,000 80,000

Administrative.................................................250,000 (4,857,900) 250,000 (4,430,000)

Before- tax profit.......................................... 662,100 570,000

Income taxes(40%)..................................... (264,840) (228,000)

After -tax profit.......................................... $397,260 $342,000

Required

a. Determine Regional Distribution"s break-even point in sales dollars.

b. What dollar sales volume is required to earn an after-tax profit of $480,000

c.Assuming budgeted 2014 sales $6,000,000, prepare a 2014contributoryincome statement.

d.Discuss the reliability of the calculation inrequirementa-c, including the limitation of the CVP model and how they affect the reliability of the model.