Question
LMN Company manufactures and sells energy drinks. The company sells 40,000 units annually. The selling price per unit is $100, the variable cost per unit
LMN Company manufactures and sells energy drinks. The company sells 40,000 units annually. The selling price per unit is $100, the variable cost per unit is $60 and its total fixed cost is $1,200,000. The company forecasts its target profit before tax to be $500,000.
The company pays 25% in taxes on all income and estimates an after-tax profit of $960,000.
Calculate the following:
A. Contribution per unit. [1 mark]
B. Contribution sales ratio [2 marks]
C. What is the break-even (units)? [3 marks]
D. How many units must be sold to achieve a target income of $500,000? [4 marks]
E. How many units must be sold to achieve an income of $96,000 after tax (tax rate 25%) [5 marks]
F. What is the margin of safety (units)? [2 marks]
G. Assuming that 35,000 pairs of shoes were sold in a year, estimate the shop's net income or loss.
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