Magnolia Company Is Considering the Production and Sale of a New

question 97

Essay

Magnolia Company is considering the production and sale of a new product with the following sales and cost data: unit sales price, $350; unit variable costs, $180; total fixed costs, $399,500; and projected sales, $910,000. Round your answers to the nearest whole unit or dollar.
(a) Calculate break-even in units.
(b) Calculate break-even in dollars (use four decimal places when calculating the contribution margin ratio).
(c) Calculate number of units that would need to be sold to generate an after-tax profit of
$420,000 assuming a 30% tax rate.
(d) Calculate dollar sales that would be needed to generate the same profit as above.
(e) Calculate the margin of safety stated as a percentage using the $910,000 projected sales level. Be sure to label each calculation and show all calculations.

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Definitions:

Design Defect

A flaw in the intended design of a product that results in it being unsafe for use or consumption.

Alternative Design

A potential solution or plan that differs from the original or current design, often considered to meet certain goals or solve problems more effectively.

Product Liability Laws

Regulations that hold manufacturers, distributors, suppliers, and retailers responsible for injuries caused by defective products.

All-Terrain Vehicle

A motorized off-road vehicle designed to travel on four tires and handle a wide variety of terrain.