Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 21 Aug 2017 My Price 11.00

Millett, Inc

Millett, Inc., compiled the following information for this year:

 

Item

Amount

Sales (10,000 units)

$5,000,000

Variable Costs

1,000,000

Contribution Margin

4,000,000

Fixed Cost

1,500,000

Before-Tax Profit

2,500,000

Tax (40%)

1,000,000

After-Tax Profit

1,500,000

 

Required:

 

1. What is the breakeven point in units? What is the breakeven point in dollars?

2. How many units must Millett, Inc. sell to earn a profit after taxes of $2,000,000?

3. Millett has learned that its total fixed costs will increase by $750,000 next year. If Millett increases its selling price per unit by 20 percent next year, how many units must it sell to earn the same before-tax profit as this year?

4. What factors should Millett, Inc.’s, management consider prior to increasing its selling price by 20 percent?

5. If Millett, Inc. can reduce its variable cost by 20 percent rather than increasing its selling price to offset the increase in fixed costs of $750,000, what is the new breakeven point?

6. If Millett, Inc. can reduce its variable cost by 20 percent to offset the increase in fixed costs of $750,000, should it also decrease its selling price? Why?

Answers

Maurice Tutor
(5)
Status NEW Posted 21 Aug 2017 01:08 PM My Price 11.00

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