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Gay and Joy developed a neat Bento box for children The shape of the containers

Part 1. Gay and Joy developed a neat Bento box for children. The shape of the containers encourages healthy eating and it is

Part 1. Gay and Joy developed a neat Bento box for children. The shape of the containers encourages healthy eating and it is very popular. They have been paying another company to manufacture the boxes for them but are interested in manufacturing the boxes themselves. They've developed the following cost estimates: Sales (100,000 units) 1,000,000 Costs: Fixed Variable $ 300.000 Raw Materials C Direct Labor 0 200.000 Factory Costs 100,000 150,000 Selling and Administrative 110.000 50,000 Costs $ 210,000 Total Costs 700,000 $ Operating Income 90,000 1. How many units will Gay and Joy need to sell to breakeven? 2. If Gay and Joy incorporate, and the corporate tax rate is 40%, how many units will they need to sell to earn $90.000 after tax? Provide a clear, properly formatted analysis. By this I mean to show your formulas or show the analysis that you prepared to provide answers. After-tax calculation If my tax rate is 20%, my contri bution margin is $5 per unit, my fixed costs total $400, and I want to earn $100 after tax, how much does my profit need to be? I can take 400 [100 times (1 minus the tax rate)]/CM and get my answer. If I take (400+ (100/(1-20)) /5 = 525/5 = 105 units. So I have to sell 105 units to earn $100 after tax. Let's prove it: 105 units x $5 = $525 contribution margin. $525 CM minus fixed costs of $400 $125 pre-tax profit. $125-20 % tax $125-25 $100 after tax profit. OK? This should help. (example expanded on 3/9 to include fixed costs)

Feb 08 2020 View more View Less

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