Reference no: EM132703251

Question - Texas Co. plans to produce and sell electronic products. The projected data for producing its products are as follows: Budgeted sales (in units) 3,000

Selling price per unit $60

Variable costs per unit $36

Total fixed costs $40,000

Income tax rate 30%

Desired profits after tax $35,000

Required - Please answer the following questions and show all your works (formula and numbers) to get full credits.

a. What are the contribution margin per unit and CM ratio?

b. How many units (per year) would it have to produce in order to break even?

c. To earn the desire after-tax profits, how many units would it have to sell/produce?

d. Calculate the margin of safety ratio in the budgets amounts are sold. Define what is meant by the MOS.

e. Calculate the degree of operating leverage if the budgets amount are sold. Define what is meant by the DOL.