Newton Cellular ltd Manufactures and sells the TopLine Cell phone For its 2021 business plan, Newton Cellular estimated the following Selling price $750 Variable cost per cell phone $450 Annual fixed costs $180,000 Net (after tax) income $360,000 Tax rate 25 The March financial statements reported that sales were not meeting expectations For the first three months of the year, only 400 units had been sold at the established price With variable costs and fixed costs staying as planned, it was clear that the 2021 after tax profit projection would not be reached unless some action was taken A management committee presented the following mutually exclusive alternatives to the president Reduce the selling price by $80 The sales team forecasts that, with the significantly reduced selling price, 5,000 units can be sold during the remainder of the year Total fixed and variable unit costs will stay as budgeted Reduce variable cost per unit by $30 through the use of less expensive direct materials and slightly modified manufacturing techniques The selling price can then be reduced by $50, and we should be able to increase sales to 5,800 units for the remainder of the year forecast Cut fixed costs by 40,000 and lower the selling price by 10 Variable costs per unit will be reduced by 10 Sales of 5,500 units are expected for the remainder of the year QUESTIONS Under the current cost and pricing structure, determine the number of units that the company must sell to (1) break even and (2) achieve its desired net income Prepare the calculations for each alternative, presenting a CVP statement for the WHOLE year for each alternative Select the best alternative Show calculations for each alternative

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Newton Cellular ltd. Manufactures and sells the TopLine Cell phone. For its 2021 business plan, Newton Cellular estimated the following: Selling price $750 Variable cost

Newton Cellular ltd. Manufactures and sells the TopLine Cell phone. For its 2021 business plan, Newton Cellular estimated the following:

Selling price $750

Variable cost per cell phone $450

Annual fixed costs $180,000

Net (after-tax) income $360,000

Tax rate 25%

The March financial statements reported that sales were not meeting expectations. For the first three months of the year, only 400 units had been sold at the established price. With variable costs and fixed costs staying as planned, it was clear that the 2021 after-tax profit projection would not be reached unless some action was taken. A management committee presented the following mutually exclusive alternatives to the president:

Reduce the selling price by $80. The sales team forecasts that, with the significantly reduced selling price, 5,000 units can be sold during the remainder of the year. Total fixed and variable unit costs will stay as budgeted.
Reduce variable cost per unit by $30 through the use of less expensive direct materials and slightly modified manufacturing techniques. The selling price can then be reduced by $50, and we should be able to increase sales to 5,800 units for the remainder of the year forecast.
Cut fixed costs by 40,000 and lower the selling price by 10%. Variable costs per unit will be reduced by 10% . Sales of 5,500 units are expected for the remainder of the year.

QUESTIONS:

Under the current cost and pricing structure, determine the number of units that the company must sell to (1) break even and (2) achieve its desired net income.

Prepare the calculations for each alternative, presenting a CVP statement for the WHOLE year for each alternative. Select the best alternative. Show calculations for each alternative.