Reference no: EM132870638
Question - Fine Company sold two products and had the following PER UNIT results for 2020:
Product A Product B
Number of units 4,000 units 1,000 units
Sales per unit $30.00 $50.00
Costs per unit
Variable Product Costs $10.00 $18.00
Fixed Product Costs 6.00 1.00
Variable Period Costs. 2.00 12.00
Fixed Period Costs 4.00 22.00 3.00 34.00
Income Before Tax 8.00 16.00
Income Tax 2.00 4.00
Net Income $6.00 $12.00
Assuming that the volume of sales = volume of production and these are the only cost drivers, answer each of the following INDEPENDENT questions. Please SHOW YOUR WORK in the shaded area to the right!!
Required -
a. What was Fine's breakeven point for Product A in DOLLARS?
b. What was Fine's margin of safety in units for Product B last year?
c. If Fine sold $135,000 of Product A, how much would their net income (after taxes) be for Product A?
d. How many units of Product B will Fine need to sell to earn $42,000 of NET INCOME (after tax) from Product B?
e. Fine wants to give the factory workers a raise which will increase the cost per unit of Product A by $0.75 per unit next year. Fine believes they can sell 5,000 units of Product A next year but Fine wants to raise the selling price of Product A high enoughso that they earn Income Before Tax of $50,000 from Product A. What should be the new selling price per unit for Product A?
f. Fine wants to sell BOTH products at last year's ratio of COMBINED sales. How many units of each product would Fine have to sell to earn $60,000 of Income Before Tax for the company?
g. Fine wants to sell BOTH products and plans to sell 5,000 unitsof Product A at regular prices next year and 2,000 units of Product B. At what new price would Fine need to sell Product B in order to earn $70,000 of total Income Before Tax?
h. Fine only wants to produce and sell one of the two products, either Product A or Product B. Determine the number of units at which the two products would produce the same amount of Income Before Tax (which is called the "point of indifference")?
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