After-Tax Target Income: Profit Analysis can sell between 9,000 and 14,000 pairs of X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that either product this year. Because the models are very similar, x-Cee-Ski will produce only one of the two models. The following information was compiled by the Accounting Department: Per-Unit (Pair) Data Mountaineering Touring Selling price $180 $120 Variable costs 130 90 Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income tax rate. Required: 1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell? pairs of touring skis 2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or loss regardless of the ski model it decided to produce? $ 3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted)
After-Tax Target Income: Profit Analysis can sell between 9,000 and 14,000 pairs of X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that either product this year. Because the models are very similar, x-Cee-Ski will produce only one of the two models. The following information was compiled by the Accounting Department: Per-Unit (Pair) Data Mountaineering Touring Selling price $180 $120 Variable costs 130 90 Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income tax rate. Required: 1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell? pairs of touring skis 2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or loss regardless of the ski model it decided to produce? $ 3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 16E
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Transcribed Image Text:After-Tax Target Income: Profit Analysis
can sell between 9,000 and 14,000 pairs of
X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that
either product this year. Because the models are very similar, x-Cee-Ski will produce only one of the two models.
The following information was compiled by the Accounting Department:
Per-Unit (Pair) Data
Mountaineering
Touring
Selling price
$180
$120
Variable costs
130
90
Fixed costs will total $320,000 if the mountaineering model is produced but will be only $220,000 if the touring model is produced. X-Cee-Ski is subject to a 40 percent income tax rate.
Required:
1. If X-Cee-Ski Company desires an after-tax net income of $48,000, how many pairs of touring model skis will the company have to sell?
pairs of touring skis
2. Suppose that X-Cee-Ski Company decided to produce only one model of skis. What is the total sales revenue at which X-Cee-Ski Company would make the same profit or loss regardless of the ski model it decided to produce?
$
3. If the Sales Department could guarantee the annual sale of 12,000 pairs of either model, which model would the company produce? (CMA adapted)
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