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In-class Exercise. Chan Co. sells pants wholesale to major retailers across USA. Each pant has a selling price of $60 with $36 in variable costs
In-class Exercise. Chan Co. sells pants wholesale to major retailers across USA. Each pant has a selling price of $60 with $36 in variable costs of goods sold. The company has fixed manufacturing costs of $1,000,000 and fixed marketing costs of $500,000. Sales commissions are paid to the wholesale sales representatives at 8% of revenues. The company has an income tax rate of 30%. Required: 1. Determine the contribution margin and the contribution margin percentage of Chan Co. HON USB Type-C 2. Determine the operating income of Chan Co if Chan Co expects to sell 200,000 pants next year. 3. How many pants must Chan sell in order to break even? 4. How many pants must it sell in order to reach: a. a target operating income of $300,000? NanoEdge b. a net income of $300,000? 5. How many pants would Chan have to sell to earn the net income of $300,000 if: (Consider each requirement independently.) a. the contribution margin per unit increases by 10%. b. the selling price is increased to $70.00
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