The Layal Corporation has compiled the following financial data for a new retail facility: annual fixed costs are estimated at $100,000; selling price per unit of product estimated at $15, variable cost per unit estimated at $5. The company is also interested to achieve a profit of 120,000 in the first year of operations and 200,000 in the second year of operations.

Formulas to be used

Break-even point units = Fixed costs / selling price per unit variable cost per unit

Break-even point $ = Break-even point Units x selling price per unit

Break-even point units (profit) = Fixed costs + Profit / selling price per unit variable cost per unit

Break-even point Profit $ = Break-even point units = Fixed costs / selling price variable cost

Case 1 . Calculate the breakeven point in units and $ and the contribution margin.

Case 2 . Calculate the breakeven point in units and $ and contribution margin taking into account the profit that the corporation is planning to have.

Answer

Case 3 (2 Marks). Calculate a) the breakeven point in units and $ b) contribution margin c) the net income if the corporation anticipates its fixed costs to increase by 180,000 and the selling price to increase by 40%.

Answer:

Case 4 Calculate the contribution margin amount and the variable cost if net income is 120,000, fixed cost amounts to 82,000 and contribution margin is 20% of sales.

Case 5 . Hiller Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

Answer