QUESTION TWO A) A company has direct production costs equal to 50% of total annual...
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QUESTION TWO A) A company has direct production costs equal to 50% of total annual sales, and indirect production costs (fixed charges, overhead, and general expenses) equal to $200,000. Annual sales amount to $800,000. If management proposes to increase annual sales to compensate for a 20% increase in indirect costs, and maintain same gross profit. i) What is the new sales level? ii) If the annual depreciation is $70,000, and tax rate is 35%, what is the net profit after tax and the annual cash flow? [5 Marks)
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