Parker Pottery produces a line of vases and a line of ceramic figurines. Each line...
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Accounting
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%.
a. Calculate the weighted average contribution margin.
b. Compute the number of vases and the number of figurines that must be sold for the company to break-even. How much revenue would be received for each product?
c. Calculate how many of each product would need to be sold in order to make an after-tax profit of $7 200.
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