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SECTION A QUESTION 2 Palatron Ltd. manufactures and sells exercise machines. Its budget for 2021 showed the following costs for selling 400 units of the
SECTION A QUESTION 2 Palatron Ltd. manufactures and sells exercise machines. Its budget for 2021 showed the following costs for selling 400 units of the machines at $1,800 per machine. Palatron Ltd.'s income tax rate is 40%. Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses Total Per unit $75,000 $187.50 90,000 $225.00 45,000 $112.50 192.000 $75.00 60,000 $150.00 78,000 $100.00 Required (present your answer neatly and clearly to get maximum marks) (a) Based on Palatron' plans for 2021, calculate the following (1) (4 marks) the desired after-tax operating income after tax for 2021. (ii) (3 marks) break even point in units and in dollars for 2021 (iii) (3 marks) What if the company wants a breakeven point of 200 units, what should the variable cost per unit be? (b) (5 marks) Management learned that for the first half of 2021, sales more than met expectations because of the lock-down policy and people want to exercise at home. 300 units have already been sold at the expected selling price. Regardless of your answer in (a(i)), management now wants to achieve an after-tax operating profit of $240,000 for 2021. It plans to reduce the selling price to $1,600 per machine for the remainder of the year. It will also promote the product at a cost of $10,000. How many units must the company sell over the remainder of the year for the company to achieve its new profit goal
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