Reference no: EM132450878

Point A firm prepares a sales budget of 4.3 million units of a product at a price of $9.85 each. The estimated contribution margin is $5.10 per unit. Fixed costs are $18,300,000.

Required:

Question a) Breakeven point in units and dollars

Question b) How many units must be sold to achieve target income of $6 million.

Question c) How many units must be sold to achieve after tax income of 5 million with a tax rate of 28%.

Question d) What is the margin of safety in dollars and percentage.

Question e) What is the operating leverage.

Question f) The production manager proposes reducing variable costs to $3.90 per unit with an increase in fixed costs of $1.8 million. Is the firm more profitable.

Question g) The sales manager proposes raising prices by $1 and increasing ad spending by $3.5 million. Demand would fall by 500,000 units. Is the firm more profitable.