Vines and Daughter manufactures and sells swimsuits for $40 each The estimated income statement for 2012 is as follows Sales $2,000,000 Variable costs 1,100,000 Contribution margin 900,000 Fixed costs 765,000 Pretax earnings $ 135,000 REQUIRED A Compute the Contribution margin per swimsuit and the ...

A Estimated sales in number of swimsuits 200000040 50000 swimsuits Variable cost per unit 1100000500 ...

Vines and Daughter manufactures and sells swimsuits for $40 each. The estimated income statement for 2012 is

Question:

Vines and Daughter manufactures and sells swimsuits for $40 each. The estimated income statement for 2012 is as follows:
Sales ........................................$2,000,000
Variable costs ...............................1,100,000
.........................900,000
Fixed costs ....................................765,000
Pretax earnings............................. $ 135,000
REQUIRED
A. Compute the per swimsuit and the number of swimsuits that must be sold to break even.
B. What is the margin of safety in the number of swimsuits?
C. Suppose the margin of safety was 5,000 swimsuits in 2012. Are operations more or less risky in 2013 as compared to 2012? Explain.
D. Compute the ratio and the breakeven point in revenues.
E. What is the margin of safety in revenues?
F. Suppose next year's revenue estimate is $200,000 higher. What would be the estimated pretax earnings?
G. Assume a tax rate of 30%. How many swimsuits must be sold to earn after-tax earnings of $180,000?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...