Reference no: EM132849112
Problem - Gladys Night is starting her own business, producing fabric face masks in her home. She is planning to produce three different styles: an adult cotton mask, a child cotton mask, and a stretchy tube mask. Based on her personal experience purchasing masks in recent months, she has estimated her revenues and costs for 2021 as follows:
|
|
Adult
|
Child
|
Tube
|
|
Revenue per mask
|
16.00
|
12.00
|
18.00
|
|
Variable costs per mask
|
9.60
|
8.40
|
9.90
|
|
Expected sales in units
|
1,000
|
1,200
|
400
|
In addition, Gladys has estimated her total fixed costs for the year as $8,800.
Required -
a) Using Excel including formulas and linkages, calculate the weighted average contribution margin per unit and the overall contribution margin percentage at the expected sales mix Gladys has predicted.
b) Determine the total sales in units and dollars at the breakeven point.
c) Determine the number of units of each product to be sold at the breakeven point.
d) Determine the total sales and number of units of each product to be sold if Gladys has a before-tax target profit of $40,000 for the year. Copy the work done for parts b) and c) and make changes, as appropriate. (The mark allocation is based on the assumption this is what has been done.)
e) Gladys expects to pay tax on her business profit at a rate of 35%. Computer her before-tax profit if her after-tax profit is $32,000.
f) Determine the total sales and number of units of each product to be sold to achieve the desired after-tax profit of $32,000.