Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please help me with this question. Thank you! :) Practice Question 3 Hopeful Ltd. produces and sells Transformix'. Each unit of the company's product sells
Please help me with this question. Thank you! :)
Practice Question 3 Hopeful Ltd. produces and sells Transformix'. Each unit of the company's product sells for $150.00 per unit. The manufacturing cost of the product includes direct materials amounting to $35.00 per unit; direct labour of $22.00 per unit; and variable manufacturing overhead of $19.50 per unit. The company's variable selling expenses was $13.50 per unit. The annual total fixed costs for the year 2019 was $1,800,000. The company sold 50,000 units for the year 2019. Ignore income tax considerations. Required: (a) How many units must Hopeful sell in order to breakeven for the year 2019? What is the net profit of Hopeful for the year 2019? (b) In 2020, Hopeful is considering a new strategy to improve the quality of its product. This would cause its total variable cost to increase to $102.00 per unit. Its annual total fixed costs will also increase to $1,900,000. Hopeful intends to increase the selling price per unit of its product in order to overcome the effects of the increase in costs. The company targets to have a contribution margin of 40%. Based on a research by the marketing department, the increase in selling price would cause a decrease in demand of 10% from the number of units sold in 2019. What is Hopeful's new selling price per unit? How many units would Hopeful need to sell in order to achieve the same net profit as 2019? Should the company implement this new strategy? Explain your answer. (Show all necessary calculations to support your answer). (c) Refer to the original information (ie. ignore part (b) data). Assume now that there is a tax rate of 25%. How many units must Hopeful sell in order to achieve a target profit after tax of $1,035,000Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started