Question - Cost-Volume-Profit Analysis
Mitchell Corp. expects to sell all the goods manufactured this year and has no beginning inventory of its one product. The estimated fixed costs for the year are $288,000; and estimated variable costs per unit are $14.00. It is expected that 60,000 units will be manufactured and sold at a price of $20 per unit. The income tax rate is 20%. Management wants the answer to these questions. Show your work.
1. What is the contribution margin?
2. What is the contribution margin ratio?
3. What is the breakeven point in units?
4. What is the breakeven point in dollars?
5. What is the pre-tax income or loss if 40,000 are sold?
6. What is the after-tax income (net income) if Sales amount to $1,200,000?
7. What is the margin of safety in units if 57,000 units are sold?
8. Prepare (a) seven-line contribution margin format income statement for sales at the breakeven point and (b) a seven-line contribution margin format income statement assuming 54,000 units are sold.