Reference no: EM13597330

Kalifo Company manufactures a line of electric garden tools that are sold in general hardware stores. The company controller, Silvia Harlow, has just received the sales for the coming year for Kalifo's three products: weeders, hedge, clippers, and leaf blowers. Kalifo has experienced considerable variations in sales volume and variable costs over the past two years, and Harlow believes the forecast should be carefully evaluated from a cost-volume-profit viewpoint. The preliminary budget information for 2010 is presented below. Items Weeders Hedge Clippers Leaf Blowers Unit sales 50,000 50,000 100,000 Unit selling price ($) 28.00 $36.00 $48.00 Variable manufacturing cost per unit ($) 13.00 12.00 25.00 Variable selling cost per unit ($) 5.00 4.00 6.00 For 2010, Kalifo's fixed factory overhead is budgeted at $2,000,000 and the company's fixed selling and administrative expenses are forecast to be $600,000. Kalifo has an effective tax rate of 40%. Determine Kalifo Company's budgeted net income for 2010. Assuming the sales mix remain as budgeted, determine how many units of each product Kalifo Company must sell in order to breakeven in 2010? Determine the total sales kalifo company must have in 2010 in order to earn a net income of $450,000. Explain the limitations of cost-volume-profit analysis that Sylvia Harlow should consider when evaluating Kalifo Company's 2010 budget.