Iscar Company manufactures aviation blades Iscar quarterly fixed cost is $2,402,400, and its variable cost per blade is $15,200 Iscar current quarterly sales are 220 units at a price of $32,000 per blade (In this question, ignore taxes, unless specifically asked about ) I) Iscar unit sales in the last 4 quarters were 210, 230, 225 and 215 Given this information how safe is the margin of safety you computed above Explain you answer j) How many units does the company need to sell to attain a target profit of $1,800,000 (ignore taxes, show your calculation, round your answer) k) Calculate the dollar sales needed to attain a target profit of $1,800,000 (ignore taxes, show your calculation, round your answer) l) Assume income tax rate is 21 , how many units would the company need to sell to produce a net income of $2,000,000 (show your calculation round your answer) m) Assumeincometaxrateis21 ,whatshouldbetotalsalesindollarstoproduceanetincomeof $2,000,000 (show your calculation round your answer) n) What is the operation leverage (ignore taxes, show your calculation) o) Explain the meaning of the operating leverage p) Explain the difference between the operating leverage and the financial leverage q) The company is considering to automate it production, which would increase it fixed cost by $400,000, and reduce it variable cost by $1,600 per unit Quarterly sales and selling price are not expected to change as a result of the automation process Would you advise the company to proceed with the automation process What would be the gain or loss from proceeding with the automation (ignore taxes, show your calculation) r) What should be the impact of the automation suggested in (q) on ISCAR operating risk Explain your answer s) As an alternative to the automation suggested above, the company is considering a marketing campaign, which would increase it fixed cost by $400,000, and increase sales by 30 units Would you advise the company to proceed with the marketing campaign What would be the gain or loss from proceeding with the marketing campaign (ignore taxes, show your calculation) Explain your answer

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Posted on Jul 15, 2024

Iscar Company manufactures aviation blades. Iscar quarterly fixed cost is $2,402,400, and its variable cost per blade is $15,200. Iscar current quarterly sales are 220

Iscar Company manufactures aviation blades. Iscar quarterly fixed cost is $2,402,400, and its variable cost per blade is $15,200. Iscar current quarterly sales are 220 units at a price of $32,000 per blade. (In this question, ignore taxes, unless specifically asked about.)

I) Iscar unit sales in the last 4 quarters were: 210, 230, 225 and 215. Given this information how safe is the margin of safety you computed above? Explain you answer:
j) How many units does the company need to sell to attain a target profit of $1,800,000 (ignore taxes, show your calculation, round your answer)?
k) Calculate the dollar sales needed to attain a target profit of $1,800,000 (ignore taxes, show your calculation, round your answer)?
l) Assume income tax rate is 21%, how many units would the company need to sell to produce a net income of $2,000,000 (show your calculation; round your answer)?
m) Assumeincometaxrateis21%,whatshouldbetotalsalesindollarstoproduceanetincomeof $2,000,000 (show your calculation; round your answer)?
n) What is the operation leverage (ignore taxes, show your calculation)?
o) Explain the meaning of the operating leverage:
p) Explain the difference between the operating leverage and the financial leverage:

q) The company is considering to automate it production, which would increase it fixed cost by $400,000, and reduce it variable cost by $1,600 per unit. Quarterly sales and selling price are not expected to change as a result of the automation process. Would you advise the company to proceed with the automation process? What would be the gain or loss from proceeding with the automation (ignore taxes, show your calculation)?
r) What should be the impact of the automation suggested in (q) on ISCAR operating risk? Explain your answer.

s) As an alternative to the automation suggested above, the company is considering a marketing campaign, which would increase it fixed cost by $400,000, and increase sales by 30 units. Would you advise the company to proceed with the marketing campaign? What would be the gain or loss from proceeding with the marketing campaign (ignore taxes, show your calculation)? Explain your answer.