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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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