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Assignment


Question 3

A) Breakeven Point in Dollar sales.

Breakeven sales in units = Fixed Cost/ (Unit Sale Price- Unit Variable Cost)

                               Fixed Cost= $ 360 000 + $ 252 000 = $ 612 000

                               Unit Sale Price= $ 20

                               Unit Variable Cost = $ 11 + $ 3= $ 14


 Break even sales units = $ 612 000/ ($20- $ 14) =   $ 612 000/ $ 6

                            = 102 000 units

 Break even sales in Dollars= Break even sales in units * unit sale price

                                             = 102 000units * $20

                                            = $ 2,040,000


 B) Units that must be sold to earn a net income of 10% on sales.

Sales units= sales / unit sale price

                        Sales= 110% of $2,040,000 = $ 2,244,000  

                          Unit Sale Price= $ 20

Sales Units required = $ 2,244,000/ $20

                                 = 112,200 units per year


 C) Units that must be sold to Earn $ 60 000 per year.

At break even sales in dollars profit = zero

To earn a profit of $60, 000, sales in dollar must = $2,040,000 + $ 60 000= $ 2,100,000

Units of sale required = sales in Dollars/ unit sale price

                                    = $ 2,100,000/ $ 20

                                     = 105 000 units


 D) Return on Asset= Net Income/ Total Assets

                      10% = Net Income/ Total Asset

                       10/ 100= Net income/ $1000 000

                     Net income= 10/100 * $1000000

                                       = $ 100 000

                    Sales Units= Income/ unit sale price

                                     = $ 100,000/ $ 20

                                     = 5000 units


 Question 4

Should XYZ stop selling to hospitals and schools?

Yes.

This is because XYZ is running a loss while selling to hospitals and schools. This loss is eating into the profits made from sales to retailers.


 

 
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