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Question 1 (20 marks) Watson Company makes ice creams, Cherry, Mint Chocolate, and Vanilla. The company's tax rate is 40%. The following cost are expected
Question 1 (20 marks) Watson Company makes ice creams, Cherry, Mint Chocolate, and Vanilla. The company's tax rate is 40%. The following cost are expected for 2020: Per quarter Cherry Mint Chocolate Vanilla Variable cost Direct material $10 $12 $13 Direct labor $15 $15 $15 Production overhead $3 $5 $7 Selling expense $4 $4.5 $5 Administration expens $3 $3.5 $4 Selling price $50 per quart $65 per quart $60 per quart Sales mix 5,000 quarts 6,000 quarts 4,000 quarts Fixed overhead, $60,000; fixed selling expense, $40,000; Fixed administrative expense, $20,000. Required: (4 marks each) a. List a pro forma income statement for 2020. b. Compute the breakeven point in dollar. How many quarts of each favor of ice creams are expected to be sold at the break-even point? c. If the company wants to make pre-tax profit of $400,000; how many quarts of each favor of ice creams should be sold? What amount of the total revenue would be? d. If the company wants to make after-tax profit of $400,000; determine the revenue of each favor of ice creams and the total revenue of the company. e. Use the answer of part a, to compute the margin of safety in terms of dollars and percentage
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