Question 1: Cost-Volume-Profit Analysis
Marbles Corporation has a maximum capacity of 200,000 units per year. Variable manufacturing costs (with respect to units manufactured) are $11.50 per unit. Fixed manufacturing overhead is $875,000 per year. Variable marketing, distribution, customer service and administrative costs (with respect to units sold) are $1.90 per unit, and fixed marketing, distribution, customer service and administrative costs are $115,000 per year. The current selling price is $21 per unit. Marbles has no beginning or ending inventory. The company’s tax rate is 32%.
How many units must be sold to earn a target operating income of $360,000 per year?
6 points for this part of the question Many ways to present this information – I’ll stick with the formula we ultimately ended up with in….