Breakeven and Cost-Volume-Profit with Taxes

question 2

Essay

Breakeven and Cost-Volume-Profit with Taxes
DisKing Company is a retailer for video disks.The projected after-tax net income for the current year is $120,000 based on a sales volume of 200,000 video disks.DisKing has been selling the disks at $16 each.The variable costs consist of the $10 unit purchase price of the disks and a handling cost of $2 per disk.DisKing's annual fixed costs are $600,000 and DisKing is subject to a 40 percent income tax rate.
Management is planning for the coming year,when it expects that the unit purchase price of the video disks will increase 30 percent.
Required:
a.Calculate DisKing Company's break-even point for the current year in number of video disks.
b.Calculate the increased after-tax income for the current year from an increase of 10 percent in projected unit sales volume.
c.If the unit selling price remains at $16,calculate the volume of sales in dollars that DisKing Company must achieve in the coming year to maintain the same after-tax net income as projected for the current year.

---

Definitions:

Sprain

An injury to ligaments caused by being stretched beyond their normal capacity and possibly torn.

Subscapularis

A muscle located in the shoulder, part of the rotator cuff that helps with internal rotation of the arm.

Triceps Brachii

A major muscle of the back of the upper limb responsible for extension of the elbow.

Brachialis

A muscle in the upper arm that flexes the elbow, situated beneath the biceps brachii.