Reference no: EM133098874

Question - JAX Co. makes sweaters for cats. The controller is working on a projection for the fiscal year 1/01/22 - 12/31/22. Projected amounts for FYE 12/31/22 can be found below:

Selling price per sweater $35

Expected sales (units): 22,000 sweaters

Manufacturing Costs

Direct Materials $3 per sweater

Direct Labor $8 per sweater

VMOH $6 per sweater

FMOH $30,000 per year

Selling & Administrative Expense

Variable $1 per sweater

Fixed $180,000 per year

Income tax rate: 30%

There are no beginning or ending WIP or FG inventories.

1. What is the Contribution Margin per unit?

2. What is the Contribution Margin percentage, rounded to two decimal points?

3. How many sweaters will need to be sold in 2022 to breakeven?

4. What amount of revenues are required to breakeven in 2022?

5. Now assume that JAX Co. would like to have Operating Income (income before taxes) of $165,000 in 2022. How many sweaters must be sold to achieve the desired operating income?

6. Disregard the assumption in question 5, and now assume that JAX Co. would like to have Net Income (income after taxes) of $99,400 in 2022. How many sweaters must be sold to achieve the desired operating income?

7. Return to the original information for the problem (presented in question 1).

Assume JAX Co. uses the Contribution Margin format of income statement (Learning Objective 9 in the textbook). If JAX Co. produces and sells 22,000 cat sweaters, what amount will reported as Contribution Margin ($) on the income statement?

8. Referring to the original information for the problem (presented in question 1).

If JAX Co. produces and sells 22,000 cat sweaters, what is the margin of safety?