Reid Recreation Products sells the Amazing Foam Frisbee for $20. The variable co
ID: 2332991 • Letter: R
Question
Reid Recreation Products sells the Amazing Foam Frisbee for $20. The variable cost per unit is $11; fixed costs are $44,000 per month.
1) What is the annual breakeven point in units? In sales dollars? (Use your answer of breakeven units to calculate the breakeven point in dollars. Round answers to 0 decimal places, e.g. 5,275.)
2) How many frisbees must Reid sell to earn $23,000 in operating income?
3) What operating income must Reid earn to realize net income of $17,800, assuming that the company is in the 27% tax bracket?
4) How many frisbees must Reid sell to earn $17,800 in net income, assuming that the company is in the 27% tax bracket?
Explanation / Answer
Annual fixed costs = 44000*12= $528000 1 Annual breakeven point in units = 528000/(20-11)= 58667 Breakeven point in dollars = 58667*20= $1173340 2 Units to be sold = (528000+23000)/(20-11)= 61222 3 Operating income = 17800/(1-0.27)= $24384 4 Units to be sold = (528000+24384)/(20-11)= 61376