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11 Dec 2019

Q 3 Ibrahim Corporation produces and sells a productA with a price of $30 per unit and variable costs of $12 per unit.Total fixed costs are $7,000.

a. Calculate Ibrahim Compagny’s contribution marginper unit.

b. How many units must Ibrahim Compagny sell tobreak even?

c. You are manager in Ibrahim Corporation. Explain whatassumptions and limitations you should consider when using CVPanalysis?

plz don't put the answer in photos

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12 Dec 2019
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Related questions

Ionic Charge, is a newly organized manufacturing business thatplans to manufacture and sell 60,000 units per year of a newproduct. The following estimates have been made of the company’scosts and expenses (other than income taxes):

Fixed Variable per Unit
Manufacturingcosts:
Directmaterials $ 25
Directlabor 15
Manufacturing overhead $ 500,000 8
Period costs:
Sellingexpenses 2
Administrative expenses 300,000
Totals $ 800,000 $ 50
Instructions
a.

What should the company establish as the sales price per unit ifit sets a target of earning an operating income of $700,000 byproducing and selling 60,000 units during the first year ofoperations? (Hint: First compute the required contribution marginper unit.)

Salesprice per unit $700,000
b.

At the unit sales price computed in part a, how many units mustthe company produce and sell to break even? (Assume all unitsproduced are sold.)

c.

What will be the margin of safety (in dollars) if the companyproduces and sells 60,000 units at the sales price computed in parta?

You are the new cost accountant for ABX Corporation. After careful review of the company’s operations you have been tasked to determine the company’s break-even point, the numbers sold to meet the company’s target profit and contribution income statement for both outcomes. Management has also asked that you provide the pros and cons for variable, traditional and activity-based costing method. After providing the pros and cons of each method recommend one method for the company’s use and support your discussion.

Company’s Data:

ABX Corporation sold 450,000 units at $65/unit. Fixed cost are $8,500,000 per year. Variable costs are $30 per unit. ABX Corporation desires a target profit of $3,500,000 per year.

6. Buffalo Company manufactures and sellsadjustable canopies that attach to motor homes and trailers. Forits budget, Buffalo estimated the following:

Selling price $420

Variable cost per canopy $205

Annual fixed costs $180,000

Net Income $250,000

Income Tax Rate 30%

The May financial statements reported that sales were notmeeting expectations. For the first 5 months of the year, only 350units had been sold at the established price with variable costs asplanned. It was clear that the net income projection for the yearwould not be reached unless some actions were taken. A managementcommittee presented the following mutually exclusive alternativesto the president:

A. Reduce the selling price by $40 per unit. The sales forecastthat at this significantly reduced price is which 2,800 units canbe sold during the remainder of the year. Total fixed costs andvariable costs per unit will stay as budgeted.

B. Lower variable cost per unit by $10 through the use of lessexpensive direct materials and slightly modified manufacturingtechniques. The selling price will also be reduced by $30 and salesof 2,200 units are expected for the remainder of the year.

C. Reduce fixed costs by $10,000 and lower the selling price by5%. Variable costs per unit will be unchanged and sales of 2,000units are expected for the remainder of the year.

Required:

(1) If no changes are made to the selling price or coststructure, determine the number of units that Buffalo must sell tobreak even and achieve its net income objective.

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