Accounting-The Sarah Corporation sells only one product. The following is budgeted

| January 30, 2017

Question
Question #1

The Sarah Corporation sells only one product. The following is budgeted information for that product:

Annual production and sales capacity (units)

60,000

Budgeted selling price

$50 per unit

Variable cost of goods sold

$14 per unit

Fixed manufacturing costs

$360,000

Variable selling and administrative costs

$6 per unit

Fixed selling and administrative costs

$240,000

Sarah’s corporate tax rate is 30%.

How many units does Sarah need to sell to breakeven?
How much revenue does Sarah need to generate to breakeven?
How many units does Sarah need to sell to earn an operating profit (before taxes) of $420,000?
How much revenue does Sarah need to generate to earn net income (after taxes) of $210,000?
Assume Sarah is currently producing and selling 52,000 units. By what percentage will operating income change if sales increase by 12% from 52,000 units? Be sure to provide figures to justify your answer.
Assume Sarah is currently producing and selling 52,000 units. By what percentage will operating income change if sales decrease by 8% from 52,000 units? Be sure to provide figures to justify your answer.

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