The car company manufactures and sells Waxworks car polish. This expensive polish is priced at $20...

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Accounting

The car company manufactures and sells Waxworks car polish. Thisexpensive polish is priced at $20 per can (applicator spongeincluded). Car Company’s costs are:
Fixed costs (per month) Variable Costs per can
Manufacturing $500000 Manufacturing $11
Sellingcosts 292000 Selling 3
.Find the monthly breakeven quantity using the above data.
2.How many cans must be sold to earn $60000 per month abovebreakeven (before taxes)?
What is the Contribution Margin Ratio (CMR), using the costs in(2)?
4. If variable selling costs increase by 20% per can, what isthe new break-even quantity, assuming $60000 per month before taxesis to be earned?
Assuming a 40% tax rate, how many cans must be sold to earn anafter-tax income of $90000 above breakeven, and assuming sellingcosts increase 20% per can?
What is the DOL in (4) above?

Answer & Explanation Solved by verified expert

3.5 Ratings (588 Votes)

1 Breakeven quantity Total fixed costsContribution per unit 500000 2920006 7920006 132000 cans Contribution per unit Selling price Variable costs 20 11 3 6 2 Number of cans to See Answer

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