Reference no: EM132533754
A firm has the following income statement for a month.
Sales: 3,000 units at $80/unit $240,000
Less: Cost of Goods Sold:
Variable Production Cost 180,000
Fixed Production Cost 19,800
Gross Margin 40,200
Less: Selling and Administrative Expenses
Variable Selling Cost 21,000
Fixed Selling Expenses 7,500
Net Income before Taxes $ 11,700
Required:
Question i. Find the firm's breakeven output.
Question ii. If it wishes to have a monthly net income before taxes of $18,000 and its cost structure remains as above, what quantity of output will it need to sell?
Question iii. If its variable production costs increase by $4 per unit, what will be its breakeven output?
Question iv. After the increase in costs in (iii), what output will it need to sell if it wishes to have the $18,000 monthly pretax profit stated earlier?
Question v. Given the variable production cost increase but no change in fixed costs, what will be the firm's monthly profit if it sells 4,000 units of output per month?
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