Assignment: Breakeven Point Analysis
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:
a) Breakeven point in units and dollars
b) How many units must be sold to achieve target income of $6 million.
c) How many units must be sold to achieve after tax income of 5 million with a tax rate of 28%.
d) What is the margin of safety in dollars and percentage.
e) What is the operating leverage.
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.
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.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.