Skipmar Company Produces a Molded Briefcase That Is Distributed to Luggage

question 105

Essay

Skipmar Company produces a molded briefcase that is distributed to luggage stores.The following operating data for the current year has been accumulated for planning purposes. Skipmar can produce 1.5 million cases a year.The projected net income for the coming year is expected to be $1.8 million.Skipmar is subject to a 40% income tax rate.
During the planning sessions, Skipmar's managers have been reviewing costs and ?expenses.They estimate that the company's variable cost of goods sold will increase 15% in the coming year and that fixed administrative expenses will increase by $150,000.All other costs and expenses are expected to remain the same.
Required:
a.What amount of sales revenue will Skipmar need to achieve in the coming year to earn the projected net income of $1.8 million?
b.What price would Skipmar need to charge for the briefcase in the coming year to maintain the current year's contribution margin ratio?

---

Definitions:

Superficial Portion

The part of a structure or organ that is closest to the surface of the body.

Pseudostratified Columnar

A type of epithelial tissue with cells of varying heights that appear stratified but each cell touches the basal lamina.

Stratified Squamous

A type of epithelial tissue composed of several layers of flat cells designed to protect underlying tissues in areas subject to abrasion and friction.

Bronchi

The major air passages of the lungs that diverge from the windpipe.