Question 2Polk Company developed the following information for its product:Per UnitSales price $90Variable cost 63)Contribution margin $27 Total fixed costs $1,080,000 Instructions Answer the following independent questions and show computations using the contribution margin technique to support your answers.How many units must be sold to break even?What is the total sales that must be generated for the company to earn a profit of $60,000?If the company is presently selling 45,000 units, but plans to spend an additional $108,000 on an advertising program, how many additional units must the company sell to earn the same net income it is now making?Using the original data in the problem, compute a new break-even point in units if the unit sales price is increased 20%, unit variable cost is increased by 10%, and total fixed costs are increased by $210,000.

Break Even Point :— It is the point at which total cost is equal to total revenue. At this point,…

Answered: Question 2 Polk Company developed the…

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 18E: Target costing Toyota Motor Corporation (TM) uses target costing. Assume that Toyota marketing...

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Question 2

Polk Company developed the following information for its product:

Per Unit

Sales price $90

Variable cost 63)

Contribution margin $27

Total fixed costs $1,080,000

Instructions

Answer the following independent questions and show computations using the contribution margin technique to support your answers.

How many units must be sold to break even?
What is the total sales that must be generated for the company to earn a profit of $60,000?
If the company is presently selling 45,000 units, but plans to spend an additional $108,000 on an advertising program, how many additional units must the company sell to earn the same net income it is now making?
Using the original data in the problem, compute a new break-even point in units if the unit sales price is increased 20%, unit variable cost is increased by 10%, and total fixed costs are increased by $210,000.

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