Question
Lexis Ltd. has estimated the following costs for producing and selling 15,000 units of its product: Direct materials $75,000 Direct labor 90,000 Variable overhead 45,000
Lexis Ltd. has estimated the following costs for producing and selling 15,000 units of its product:
Direct materials $75,000
Direct labor 90,000
Variable overhead 45,000
Fixed overhead 30,000
Variable selling and administrative expenses 60,000
Fixed selling and administrative expenses 40,000
Lexis Ltd.'s income tax rate is 40%.
a. Given that the selling price of one unit is $38, calculate how many units Lexis would have to sell in order to break even.
b. Assume the selling price is $43 per unit. Calculate how many units Lexis would have to sell in order to produce a profit of $25,000 before taxes.
c. Calculate what price Lexis would have to charge in order to produce a profit of $30,000 after taxes if 7,500 units were produced and sold.
d. Calculate what price Lexis would have to charge in order to produce a before-tax profit equal to 30% of sales if 10,000 units were produced and sold.
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