Native American Pottery Expects to Earn a Profit of $95,000

question 50

Essay

Native American Pottery expects to earn a profit of $95,000 in 2014.The company manufactures ornamental ceramic tiles.Each lot of 100 blocks requires variable costs of $5.00 for direct materials,$3.50 for direct labor,and $4.50 for overhead.Total variable costs are thus $13 per lot.Fixed costs for 2014 are expected to be $130,000.Each hundred-block lot will sell for $33.
a.Determine how many lots of ceramic tiles the company must sell to earn its targeted profit,and convert this amount to sales dollars.
b.Compute breakeven sales in dollars.
c.Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit.Use the contribution margin as part of your explanation.

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Definitions:

Verbal

Pertaining to words and language, especially the use and understanding of words in communication and reasoning.

Visual

Relating to seeing or sight, involving the use and interpretation of visual information.

Neither Verbal Nor Visual

Refers to information or processes that do not rely on language or imagery, potentially involving other sensory modalities or cognitive operations.

Demand Characteristics

Subtle cues or signals in an experimental environment that influence the behavior or responses of participants.