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?
