Cost-volume-profit analysis Parker Pottery produces a line of vases and a line of ceramic figurines....
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Accounting
Cost-volume-profit analysis
Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labour; hence, there is no traceable fixed costs. Common fixed costs equal $17 400. Parkers accountant has begun to assess the profitability of the two lines and has gathered the following data for last year:
|
| Vases | Figurines |
| Price | $40 | $70 |
| Variable costs | $30 | $42 |
| Number of units | 1 200 | 400 |
The tax rate is 28%.
Questions:
a. Calculate how many of each product would need to be sold in order to make an after-tax profit of $7 200.
b. Parker Pottery is considering upgrading its factory to improve the quality of its products. If the upgrade is successful, the projected sales of vases will be 1 400 and figurine sales will increase to 600 units. The upgrade will result in an increase in fixed costs to a total of $18,480. Now how many units of each of the products must it sell in order to break-even?
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