How much sales revenue must be earned to produce profits

Assignment Help Managerial Accounting

Reference no: EM13949734

Tom Flannery has developed a new recipe for fried chicken and plans to open a take-out restaurant in Oklahoma City. His father-in-law has agreed to invest $500,000 in the operation provided Tom can convince him that profits will be at least 20 percent of sales revenues. Tom estimated that total fixed expenses would be $24,000 per year and that variable expenses would be approximately 40 percent of sales revenue.

Required

1. How much sales revenue must be earned to produce profits equal to 20 percent of sales revenue? Prepare a contribution income statement to verify your answer.

2. If Tom plans on selling 12-piece buckets of chicken for $10 each, how many buckets must he sell to earn a profit equal to 20 percent of sales? Twenty-five percent of sales? Prepare a contribution income statement to verify the second answer.

3. Suppose Tom's father-in-law meant that the after-tax profit had to be 20 percent of sales revenue. Under this assumption, how much sales revenue must be gen- erated by Tom's chicken business? (Assume that the tax rate is 40 percent.)

Reference no: EM13949734

Questions Cloud

The maintenance margin is 35 percent : You decide to buy 1,600 shares of stock at a price of $64 and an initial margin of 50 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 35 percent? (Do not round intermedia..

Using the effective listening guidelines in the text : Using the effective listening guidelines in the text, make three suggestions that would allow Alan to fulfill his responsibility to provide employees with critical feedback about performance and to establish a supportive climate?

What types business problems use anova in research issues : Could you please help me with four examples of ANOVA analysis that would be used in the business world? What types of business problems would use ANOVA in research issues, problems or opportunities in figuring out business issues?

Why are t-bond returns high when the market returns are low : "Why are t-bond returns high when the market returns are low"

How much sales revenue must be earned to produce profits : How much sales revenue must be earned to produce profits equal to 20 percent of sales revenue? Prepare a contribution income statement to verify your answer.

What does it mean to have a significant interaction : How would you explain the logic of ANOVA to someone with no experience? What does it mean to have a significant interaction (in ANOVA)? Discuss by using examples.

What was the dividend yield : With 50 million shares outstanding and a stock price of $60, what was the dividend yield?

Cost-volume-profit analysis : Johnson, Inc. projects sales for next year will be 60,000 units if the sales price is $28. At this level, unit fixed costs will be $8 while total variable costs will be $720,000. The vice president of marketing advises management to reduce sales pric..

Why these four concepts are important for you intellectually : Can you discuss why these four concepts are important for you intellectually and/or professionally.

User Account

All Pages