Question
CVP question Laila company has provided the following information about the company. Sales $225,000 Sales Discount $20,000 Overhead cost (Fixed) $35,000 Overhead (Variable) $ 20,000
CVP question Laila company has provided the following information about the company. Sales $225,000 Sales Discount $20,000 Overhead cost (Fixed) $35,000 Overhead (Variable) $ 20,000 $2,500 $39,600 $15,000 Sales Return/Allowance Selling commission [variable] Selling commission [fixed] Variable admin expenses Fixed admin expenses Interest expenses $ 24500 $ 20,000 25% $5,420 Capacity of producing 4,000 units Units sold 3,500 Units produced 3,500 Hint: all selling and admin costs are operating expenses REQUIRED 1. Calculate the net income using contribution approach 2. Calculate Net income using the absorption method | Financial Accounting method] 3. Find CM per unit and the Contribution Margin Ratio 4. Determine the breakeven sales in units and dollars 5. Calculate margin of safety in dollars and in percentage. 6. The sales manager believes that a project of the company could increase sales by 25% but variable cost will also decrease by $5,000 and fixed cost will increase by $ 85,000. Should the company accept the project or reject? 7. Determine the sales revenue necessary to generate before tax profit of $75,000. 8. Determine sales revenue necessary to generate after-tax profit of $75,000 if tax rate is 30% 9. Calculate degree of leverage (DOL) and if sales increases by 25%, what will be the increase or decrease in net income of this company? What will be the total net income if the project is accepted [use original data in the beginning]
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