Corporación Nueva has provided the following financial information: Variable cos
ID: 3198195 • Letter: C
Question
Corporación Nueva has provided the following financial information:
Variable costs per unit $ 450.
Sales prices per unit $ 600.
Total fixed costs $ 18,000.
Required:
to. Compute the tie point in units
b. Compute the dollar tie point
c. Compute the volume of sales in units if you want a net income "Net Income"
of $ 225,000 before contributions
d. Compute the volume of sales in dollars assuming an operational income (before contributions) of $ 300,000.
and. Determine the volume of sales in units and dollars, if a net income of $ 300,000 is desired. Consider a 40% tax rate.
Explanation / Answer
Variable costs per unit $ 450, Sales prices per unit $ 600, Total fixed costs $ 18,000.
a. Compute the tie point in units
let the units be u
Revenue = price per unit x no. of units = 600u
cost = fixed cost + variable cost = fixed cost + no. of units x cost per unit = 18000 + 450u
Tie point : revenue = cost
600u = 18000 + 450u
150u = 18000
u = 120
so tie point units are 120 units
b. Compute the dollar tie point
Dollar tie point is : revenue or cost at 120 units = 120 x 600 = $72,000
c. Compute the volume of sales in units if you want a net income "Net Income" of $ 225,000 before contributions
Net income = Revenue - cost = 600u - (18000 +450u) = 150u - 18000 = 225,000
150u = 225000+18000 = 2,43,000
u = 243000/150 = 1620 units
d. Compute the volume of sales in dollars assuming an operational income (before contributions) of $ 300,000.
Net income = Revenue - cost = 600u - (18000 +450u) = 150u - 18000 = 300,000
150u = 300000+18000 = 3,18,000
u = 318000/150 = 2120 units
volume sales in dollars = units x price per unit = 2120 x 600 = $1272000