Reference no: EM133037620
Question - Laila company has provided the following information about the company
Sales $225,000
Sales Discount $20,000
Overhead cost (Fixed) $35,000
Overhead (Variable) $20,000
Sales Return /Allowance $2,500
Selling commission [variable] $39,600
Supplies $2,600
Selling commission [fixed] $15,000
Prepaid expense $11,000
Variable admin expenses $24500
Accrued cost $7900
Fixed admin expenses $20,000
Tax 25%
Interest expenses $5,420
Capacity of production 4,000 units
Units sold 3,500
Units produced 3,500
Hint: all selling and admin costs are operating expenses.
REQUIRED -
1. Calculate the net income using contribution approach?
2. Calculate Net income using the absorption method [Financial Accounting method]?
3. Find CM per unit and the Contribution Margin Ratio?
4. Determine the breakeven sales in units and dollars?
5. Draw a graph to show the profit and lost and breakeven point for this company [BE graph]?
6. Calculate margin of safety in dollars and in percentage. Explain what this concept means to a cost accountant.
7. The sales manager believes that a project of the company could increase sales by 25% but variable cost will also decrease by $5,000 and fixed cost will increase by $ 85,000. Should the company accept the project or reject?
8. Determine the sales revenue necessary to generate before tax profit if the after tax is$75,000. The tax rate is 18%.
9. Determine sales revenue necessary to generate after-tax profit of $85,000.
10. Calculate degree of leverage [DOL] and if sales increases by 25%, what will be the increase or decrease in net income in $ of this company? What will be the total net income if the project is accepted?