Subject: Cost Accounting and Control

Give the Correct Answer and Show Solution:

Case 1

Snider Company produces and sells two products: A and B in the ratio of 3A to 5B. Selling prices for A and B are, respectively, $1,200 and $240; respective variable costs are $480 and $160. The company's fixed costs are $1,800,000 per year.

Compute the volume of sales in units of each product needed to:

• a. break even.
• b. earn $800,000 of income before income taxes.
• c. earn $800,000 of income after income taxes, assuming a 30 percent tax rate.
• d. earn 12 percent on sales revenue in before-tax income.
• e. earn 12 percent on sales revenue in after-tax income, assuming a 30 percent tax rate.