Reference no: EM132899706

Question - Greenhorn Company makes and sells busts of Paciolo, the famous monk who is credited with the introduction of the double entry system of accounting. The normal selling price is $50. The company's costs for 2019, when it produced and sold 8,000 busts, were as follows:

Production costs:

Direct materials* $12.50 per unit

Direct labor* $15.00 per unit

Variable factory overhead* $ 2.50 per unit

Fixed factory overhead $10.00 per unit

Selling and administrative expenses:

Sales commissions* $ 2.50 per unit

Shipping* $ 0.50 per unit

Fixed selling and adm exp $12.00 per unit

*This cost changes in total in proportion to changes in the number of busts produced and sold.

The variable costs per unit are likely to remain the same in 2020. Total fixed costs are expected to increase by 30 percent. If the selling price is kept at $50 in 2020, the sales volume is expected to stay at 8,000 units. There was no beginning inventory in 2020. The income tax rate is 40 percent.

Required -

1. What type of cost are direct materials and direct labor?

2. What type of cost are sales commissions and shipping?

3. What is combined variable cost per unit?

4. What is total variable cost at 8000 units?

5. What is contribution margin per unit?

6. What is total fixed costs at 8000 units in 2019?

7. What is total fixed costs at 8000 units in 2020?

8. What is total contribution margin at 8000 units?

9. What is profit at breakeven volume?

10. What is total contribution margin at breakeven volume in 2020?

11. What is breakeven volume in 2020 (round up to the nearest whole number)?

12. What is target volume to generate $9200 in pretax profit in 2020 (round up to the nearest whole number)?

13. What is target volume to generate $15,720 in after tax profit in 2020 (round up to the nearest whole number)?