Julie's Jewels Sells Cubic Zirconium (Fake Diamond)rings for $80 Each

question 101

Essay

Julie's Jewels sells cubic zirconium (fake diamond)rings for $80 each. The projected income statement for 2006 follows:
Sales $4,000,000
Variable costs (2,200,000)
Contribution Margin 1,800,000
Fixed costs (1,600,000)
Pre-tax profit $ 200,000
a)Compute the contribution margin per ring and the number of rings that must be sold to break even.
b)Compute the contribution margin ratio and the breakeven point in total revenue.
c)Suppose the total revenues were $200,000 greater than expected. What is the total pre-tax profit?
d)What is the margin of safety in number of rings?
e)Assume a tax rate of 25%. How many rings must be sold to earn an after-tax profit of $300,000?

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Definitions:

Share Of Profits

The portion of a company's earnings allocated to each share of common stock, indicating the financial benefit for shareholders.

Coalition Building

The process of bringing together diverse groups or individuals with a common interest to form a coalition or alliance to achieve shared objectives.

Opponents

Individuals, groups, or entities that are on opposing sides in a competition, conflict, or negotiation.

Conflicting Goals

Divergent objectives between parties that can complicate or hinder the achievement of a common agreement.