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CalCorp produces pocket size calculators that are sold for $ 10 per unit. The costs associated with...

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Accounting

CalCorp producespocket size calculators that are sold for $ 10 per unit. The costsassociated with each unit are as follows: Direct materials = $3.00, Direct labour = $ 0.25, Variable overhead = $ 2.00, andvariable selling and administrative cost = $ 0.75. Total fixedcosts are $ 100,000 for manufacturing activities and $ 20,000 forthe selling and administrative functions. In a recent meeting, theboard of directors asked the accounting function to perform acost-volume-analysis and produce a break-even chart based on thecurrent revenue and cost functions of the Company.

Required:

a. What isCalCorp’s current per-unit contribution ratio?

b. What are theCompany’s break-even revenues?

c. What targetrevenues should be to earn net profits of $ 40,000?

d. What targetrevenues should be to earn a return on sales (i.e., net profitsover revenues) of 20%?

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