Reference no: EM133141429

Question - North Corporation sells a single product for $50. Its management estimates the following revenues and costs for the year 2022:

Net sales $700,000 Selling expenses-variable $20,000

Direct materials 90,000 Selling expenses-fixed $20,000

Direct labor 60,000 Administrative expenses-variable $10,000

Manufacturing overhead- variable 20,000 Administrative expenses-fixed 10,000

Manufacturing overhead- fixed 30,000

Required -

a. Assuming fixed costs and net sales are spread evenly throughout the year, determine North's monthly break-even point in (1) units and (2) dollars.

b. Calculate the contribution margin ratio, the annual margin of safety ratio, and the annual profit. (2 Marks)

c. Determine the percentage increase in annual profits if North Corporation increases its selling price by 20% and all other factors (including demand) remain constant.

d. Assume the price remains at $50 per unit and variable costs remain the same per unit, but fixed costs increase by 18% annually. Calculate the percentage increase in unit sales required to achieve the same level of annual profit calculated in part (b).

e. Determine the sales required to earn an operating income of $360,000 after tax. North Corporation's income tax rate is 42%.