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Cost-Volume Profit Analysis Hailstorm Company sells a single product for $28 per unit. Variable costs are $22 per unit and fixed costs are $60,000 at
Cost-Volume Profit Analysis Hailstorm Company sells a single product for $28 per unit. Variable | ||||
costs are $22 per unit and fixed costs are $60,000 at an operating level of 7,000 to 15,000 units. | ||||
a. What is Hailstorm Company's break-even point in units? | ||||
b. How many units must be sold to earn $12,000 before income tax? | ||||
c. How many units must be sold to earn $14,500 after income tax, assuming a 35% tax rate? | ||||
a. Break-even point (units) | ||||
Total | Per Unit | |||
Revenue | ||||
Variable Cost | ||||
Contribution Margin | ||||
Fixed Costs | ||||
Operating Income | * At break-even point, operating income is equal to $0. This would | |||
Break-even point (units) | units | |||
b. Target units given a target pre-tax income | ||||
Total fixed costs | ||||
Desired income before tax | ||||
Contribution margin per unit | ||||
Target units | units | |||
c. Target units given an after-tax target income | ||||
Total fixed costs | ||||
Target after-tax income | ||||
Tax rate | ||||
Target pre-tax income | ||||
Contribution margin per unit | ||||
Target units | units | * units should be rounded up to the next whole unit | ||
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