Single-Product: Ellson Electronics Company
Ellson Electronics Company manufactures video cassette recorders, which it sells for $300 per unit. Variable costs are $210 per unit, and fixed costs are $630,000 a year. The tax rate is 40%.
Required:
a. How many VCRs must be sold each year for the firm to break even?
b. Determine the number of VCRs that must be sold if the firm desires an after-tax profit of $270,000.
c. In an effort to increase sales, the firm may reduce the price to $270 per unit. Calculate the number of units that must be sold to achieve an after-tax profit of $270,000.