Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. q 3 jassim compagny is producing only one product.

Q 3 Jassim Compagny is producing only one product. Two types of direct materials are used...

Free

70.2K

Verified Solution

Question

Accounting

Q 3 Jassim Compagny is producing only one product. Two types ofdirect materials are used to produce this product direct materialtype A and direct material type B.

The estimated data for Jassim Compagny is as following:

Sales                                                                                       $90,000

Costs:

Direct materials typeA                             $40,000

Hourlyemployees                                      15,000

Manager’ssalary                                        10,000

Direct materials typeB                                 5,000

Marketing                                                   10,000

TotalCosts                                                                   80,000

Budgeted pretaxprofit                                                        $    10,000

            Themarketing costs include $5,000 that does not change with the changein sales volumes.  The income tax rate is 20%.

a.   Compute the revenues needed to achieve atarget after-tax income of $30,000.

b.   What is the margin of safety in revenue?

  

Answer & Explanation Solved by verified expert
4.5 Ratings (626 Votes)

Sales $90,000
Variable Costs:
Direct materials type A $40,000
Hourly employees                                       $15,000
Direct materials type B $5,000
Marketing $5,000
Contribution Margin $25,000
Contribution Margin ratio                                                       0.27777778
Target-Post tax Profit $                                                      30,000.00
Tax rate 20%
Pre tax Profit to be achieved(30000/100%-20%) $                                                      37,500.00
Calculation of fixed Cost
Manager’s salary $                                                      10,000.00
Marketing   $                                                        5,000.00
Fixed Cost $                                                      15,000.00
Revenue required to achieved target income 15000+37500/0.27777778
$                                                    189,000.00
Calculation of Breakeven Point
Formula Fixed cost/Contribution margin ratio
15000/0.27777778
Breakeven Point $                                                      54,000.00
Calculation of margin of safety
Formula

Sales revenue- Breakeven Point

90000-54000
margin of safety

$                                                      36,000.00

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

YIELD TO MATURITY-4 A firm's bonds have a maturity of 10 years with a $1,000 face value,...

Finance
Q

Describe what is meant by asset impairment and identify the sources of inherent risks related to...

Accounting
Q

Every morning Mary randomly decides on one of three possible ways to get to work. She...

Basic Math
Q

On January 4, 2018, Runyan Bakery paid $324 million for 10 million shares of Lavery Labeling...

Accounting
Q

springs A B and C each of force constant k a shown in figure If...

Physics
Q

in Problems 51 62 the function f is one to one a Find its inverse...

Basic Math
Q

If the Hunter Corp. has ROE of 12 percent and a payout ratio of 15...

Accounting
Q

Carter Containers sold marketable securities, land, and common stock for $36.0 million, $12.0 million, and...

Accounting
Q

On December 31, 2024, Windsor Corporation signed a 5-year, non cancelable lease for a machine...

Accounting
Q

After extensive medical and marketing research, Pill, Inc., believes it can penetrate the pain reliever...

Accounting
Q

ford company completed jobs that cost $37,000 to produce. in the same

Accounting
Q

Serene Spa Sales uses the perpetual inventory system and the gross method of accounting for...

Accounting