90.2K

Verified Solution

Link Copied!

Hello, Im a bit confused to tackle this problem in one of my assignmnents. if you can help me understand this id appreciate it.

heres the question: "Assume that Professora purchases the equipment for the residential line only and makes minor changes, resulting in total fixed costs of $38,100,000. If the sales mix remains constant, determine the number of units from each product line for MEH to achieve an after-tax income of $42 million."

Residential line = # of units sold 40,000. unit price 5,000$.

Commercial line = # of units sold 10,000. unit price 25,000$

Income tax is 40%.

I feel like iv made a mistake somewhere and cant find it. I tried to verify my answer was correct by doing the following. on the last step, step4, i multiplied (8,521.40 x 25,000) + (34,085.60 x 5,000) = $383, 463, 000. then i did: (383,463,000 x0.40 = 153,385,200). then: 383,463,00 - 153,385,200 = 230,077,800. Did i do this right? thankyou in advance

Mylonopoulos Energy & Heatin CVP Analysis Residential Systems Commercial Systems Total Total in$ Per Unit in $ 5,000 136,000,000 3,400 Total in $ Per Unit in $ Sales Variable Costs Contribution Margin Total Fixed Costs Net Income Net Income after Tax 40,000 x 5,000 200,000,000 10,000 x 25,000 250,000,000 22,000 x 10,000 220,000,000 18,000+4,000 22,0 25,000 450,000,000 356,000,000 94,000,000 39,100,000 54,900,000 64,000,000 1,600 30,000,000 3,000 32,940,0 les Mix & Contribution Ma Commercial Systems Residential Systems 10,000/50,000-0.20-20% 40,000/50,000-0.80-80% Sales Mix (50,000 units) CM per Unit 3,000 1,600 tep 2: Weighted Avera (3,000 x 0.20) (1,600 x 0.80) 1,880 tep 3: (Fixed CostsTa tNet Income)/(Weighted (38,100,00042,000,000)/1,880 42,606.38298 we round up so 42,607 units How many of each unit though? tep 4:Sa s Mix from each sector x Total # of Units Commercial Units 42,607 x 0.20 - Residential Units 42,607 x 0.80 8,521.40 34,085.60

Answer & Explanation Solved by verified expert

See Answer