XYZ Company provides the following data: Sales Price - $10 Variable Cost per...
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Accounting
XYZ Company provides the following data:
Sales Price - $10
Variable Cost per unit - $6
Fixed Cost - $20,000
Units sold - 6,000
a) 4% - What is the contribution margin per unit for the above data and what is meant by contribution margin per unit?
b) 5% -How many units need to be sold if the company wants to earn an after tax income of $80,000. The tax rate is 40%.
c) 5% - By how much should sales price increase if the company wants to raise its advertising costs (fixed cost) by $8,000 while selling the same number of units and keeping the same level of profit?
d) 5% - If the company doesnt change its sales price of $10, and cannot cut costs, what else would you advise the company to do to cover the anticipated extra $8,000 fixed cost to keep the same level of profit? Show by calculation why your advice is correct
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