Reference no: EM133143403
Question - Davy Company sells two products, a standard and deluxe version of a toy. The budgeted volume, prices, and variable costs per unit for each product appear below. The total fixed cost is $1,300. Please use a spreadsheet to solve the problem.
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Standard
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Deluxe
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Planned units sold
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100
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50
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Price per unit
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$22
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$45
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Variable cost per unit
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$16
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$23
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1) The planned sales mix of 100 units of Standard and 50 units of Deluxe,
What is the breakeven point in units?
What is the breakeven point in dollars?
Assuming a tax rate of 18.0 percent, how many units of Standard and Deluxe are required to achieve a profit after tax of $8,000?
2) Now assume that Davy produces and sells only Deluxe and that demand for it is a normally distributed random variable with a mean of 490 units and a standard deviation of 100 units. Using a tax rate of 18 percent and a fixed cost of $1300, what is the probability of making a profit after taxes of at least $8,000?
3) What would be at least two assumptions of CVP analysis using this problem as an example. What would the impact be on the answers in Part 1 if either of these assumptions do not hold?
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