1 answer

Problem 7-51 Cost-Volume-Profit Analysis with Income Taxes and Multiple Products (Appendix) (LO 7-1, 7- 2, 7-4,...

Question:

Problem 7-51 Cost-Volume-Profit Analysis with Income Taxes and Multiple Products (Appendix) (LO 7-1, 7- 2, 7-4, 7-5, 7-11) [T
management that it can sell between 22,000 and 26,000 units of elther product this year. Because the models are very similar,
Variable costs per unit Fixed costs will total $606,400 If the mountaineering model is produced but will be only $514.200 if
Problem 7-51 Part 4 4. Suppose the variable cost per unit of touring skis decreases by 15 percent, and the total fixed cost o
Problem 7-51 Part 5 5. Suppose management decided to produce both products. If the two models are sold in equal proportions,
Problem 7-51 Cost-Volume-Profit Analysis with Income Taxes and Multiple Products (Appendix) (LO 7-1, 7- 2, 7-4, 7-5, 7-11) [The following information applies to the questions displayed below) Alpine Thrills Ski Company recently expanded its manufacturing capacity. The firm will now be able to produce up to 28,000 pairs of cross-country skis of either the mountaineering model or the touring model. The sales department assures management that it can sell between 22.000 and 26,000 units of either product this year Because the models are very similar, the company will produce only one of the two models. The following information was compiled by the accounting department Selling price per unit Variable costs per unit | Model fountaineerine $145.00 85.70 Touring $133.00 85.70 Fixed costs will total $606 400 if the mountaineering model is produced but will be only $514.200 If the touring modelis produced. Alpine Thrills Ski Company is subject to a 30 percent income tax rate! Problem 7-51 Part 2 2.1 Alpine Thrills Ski Company desires an after-tax net income of $39,620, how many pairs of touring skis will the company have to calinannt mind Intermediate Faultinne Daund te final Ancar to the nee d
management that it can sell between 22,000 and 26,000 units of elther product this year. Because the models are very similar, the company will produce only one of the two models. The following information was compiled by the accounting department. Selling price per unit Variable costs per unit Model Mountaineering $145.00 95.79 Touring $133.00 Fixed costs will total $606.400 if the mountaineering model is produced but will be only $514.200 if the touring model is produced. Alpine Thrills Ski Company is subject to a 30 percent income tax rate. Problem 7-51 Part 2 2. If Alpine Thrills Ski Company desires an after-tax net income of $39,620 how many pairs of touring skis will the company have to sell? (Do not round intermediate calculations. Round your final answer to the nearest whole unit.) Number of pairs to be sold *******
Variable costs per unit Fixed costs will total $606,400 If the mountaineering model is produced but will be only $514.200 if the touring model is produced. Alpine Thrills Ski Company is subject to a 30 percent income tax rate. Problem 7-51 Part 3 3. How much would the variable cost per unit of the touring model have to change before it had the same break-even point in units as the mountaineering model? (Round your intermediate calculations and final answer to 2 decimal places.) The variable cost per unit would have to
Problem 7-51 Part 4 4. Suppose the variable cost per unit of touring skis decreases by 15 percent, and the total fixed cost of touring skis increases by 15 percent. Compute the new break-even point. (Do not round intermediate calculations. Round your final answer up to nearest whole unit.) New break-even point
Problem 7-51 Part 5 5. Suppose management decided to produce both products. If the two models are sold in equal proportions, and total fixed costs amount to $540,800, what is the firm's break-even point in units? (Do not round Intermediate calculations and round your final answer up to nearest whole number.) Break-even point units

Answers

2. Desired after tax income = $39620
Before tax income = $39620/0.70 = $56600

Number of pairs to be sold = (Fixed Cost + Desired Profit) / Contribution Margin per unit
= ($514200+56600)/47.30 = 12068 pairs

3.
Break even for Mountaineering = $606400 / 59.30 = 10226 pairs
For 10226 pairs of Touring, Variable cost has to be = 10226 x $133 - 514200 = $845858
Per unit variable cost = $845858/10226 = $82.72 per pair

Therefore variable cost per unit have to reduce by $2.98 per pair i.e. $85.70-82.72

4.
Revised Contribution Margin = $133 - $85.70 x 0.85 = $60.155
Revised Fixed Cost = $514200 x 1.15 = $591330

Break even = $591330 / 60.155 = 9831 units

5.
Weighted Contribution Margin = $59.30 x 1/2 + 47.30 x 1/2 = $53.30
Breakeven = $540800 / 53.30 = 10147 units

.

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