Reference no: EM13341799

(a) CMu = Ru - VCu =
BEPu = FC ÷ CMu= units
BEP$ = BEPu × Ru =

(b) Pretax Profit = CM(X) - FC

X = units

(c) Pretax Profit = CM(X) - FC

X = units in 5 months

29,200 × 75% = 21,900 in the three busy months
21,900 ÷ 3 = 7,300 each month if sold evenly

(d) Pretax Profit = After tax profit ÷ (1 - TR)
Pretax Profit =

Pretax Profit = CM(X) - FC

X = units in 5 months

35,000 × 75% = 26,250 (rounded) in the three busy months or 8,750 per month

(e) One of the variable costs in a snow cone stand is ice. Due to the heat in Florida, ice will melt as the day progresses and on hotter days, making the variable cost per unit different under different circumstances.

To plan for the melting ice before it is sold, S'No'Kones will have to freeze extra ice, so the assumption that all product is used will not necessarily be true.

The weather conditions in the area of business might cause assumptions to be inaccurate. Bad weather like hurricanes can have a heavy effect on business. For example, a hurricane may force people to evacuate from the region and there will not be any customers available for the business-and the hurricane season begins in the summer during the most popular snow cone time.

Selling price per unit is 1.50
Variable cost per unit- 0.45
Fixed cost per month-1,260

What is the breakeven point for the company?

If the owner wants to earn a monthly pretax profit of 1,200 how many units would need to be sold each month?

The owner wants to earn a pretax profit of 24,360 annually. The snow cone stand is only open five months of the year ( may - September ) and no fixed costs are incurred when the stand is not open. How many snow cones would need to be sold in total during those five months? If three months of the five generate 0.75 percent of the company sales. How many snow cones would need to be sold during those three months?

Recalculate your answer to the last question assuming a tax rate of 20 percent and a desired after tax profit of 24,360.

Discuss circumstances that might cause the BEP and CVP assumptions to be inaccurate.