Question:
(CVP) Seattle Leisure Designs has designed a new athletic suit. The company plans to produce and sell 30,000 units of the new product in the coming year. Annual fixed costs are $600,000, and variable costs are 70 percent of selling price. If the company wants a pre-tax profit of $300,000, at what minimum price must it sell its product?
(CVP) Sheridan Shacks makes portable garden sheds that sell for $1,800 each. Costs are as follows:
|
Per Unit
|
Total
|
|
Direct material
|
$800
|
|
|
Direct labor
|
90
|
|
|
Variable production overhead
|
60
|
|
|
Variable selling and administrative cost
|
50
|
|
|
Fixed production overhead
|
|
$200,000
|
|
Fixed selling and administrative
|
|
60,000
|
a. How many garden sheds must the company sell to break even?
b. If Sheridan Shacks' management wants to earn a pre-tax profit of $200,000, how many garden sheds must it sell?
c. If Sheridan Shacks' management wants to earn a pre-tax profit of $280,000, how many garden sheds must it sell?