Reference no: EM132970869

Daffy Duck, Co. has a product, a 3D storybook that allows the reader to be one of the characters in the book, which sells for $24 per unit. The variable costs are $14 per unit, and fixed costs total $62,000 per year. Daffy Duck is wanting to make some decisions about this product and has asked for your help in some analysis.

Daffy Duck, Co. has a product, a 3D storybook that allows the reader to be one of the characters in the book, which sells for $24 per unit. The variable costs are $14 per unit, and fixed costs total $62,000 per year. Daffy Duck is wanting to make some decisions about this product and has asked for your help in some analysis.

Required:

Problem 1: What is the break-even point in units for this product for Daffy Duck Co.?

Problem 2: What is the total (not per unit) contribution margin at the break-even point?

Problem 3: If Daffy Duck desires to earn a pre-tax income of $250,000, how many units must it sell?

Problem 4: If Daffy Duck desires to earn an after-tax income of $190,000, how many units must it sell if the tax rate is 30%?

Problem 5: What if Daffy Duck plans to increases sales by 10% above the level achieved in part d, and assuming fixed costs remain unchanged, by what dollar amount would after-tax income (net income) be expected to increase?

Problem 6: The marketing manager informs management that to increase sales volume by 10%, as considered in part e, they would need to increase advertising by $15,000 per year. How many additional units would have to be sold to maintain the income after tax (as found in part d based on the 10% increase in sales) if advertising is increased by $15,000?

Problem 7: If instead of trying to sell more units as in part f, Daffy Duck chose to increase the selling price per unit to cover the additional $15,000 in advertising expense, by how much would they have to increase the selling price to still maintain the same after-tax income (as found in e based on the 10% increase in sales).