Mr Mba

A610 Managerial Accounting

-------Assignment III

Name: Li Fu Student Number:1192301 Name: Weiwei Zhong Student Number: 1080099

3-47 a. After-tax operating profit for Year1= [($400-$165)x 25,000 units- $1,500,000] x (1-35%) = $2,843,750 b. Break-even points in Year 1= $1,500,000/ ($400-$165)= 6,383units c. After-tax operating profit for Year2= [($400-$165)x 28,000 units- ($1,500,000+$300,000)] x (1-35%)= $3,107,000 d. Break-even points in Year 2= ($1,500,000+$300,000) x $400/ ($400-$165)=$3,063,830 e. $2,843,750= [($400-$165) x X* units- ($1,500,000+$300,000)] x (1-35%), X*= 26,277units S*= 26,277units x $400=$10,510,800 f. $750,000= [($400-$165)x 28,000 units- ($1,500,000+Xadvertising)] x (1-35%), Xadvertising= $3,926,154 3-53 a. After-tax profit= [($500-$120)x 850+ ($800-$400)x 100+ ($4,000-$2,800)x 50 -$390,000]x (1-40%)= $19,800 b. Break-even sales S*= $390,000/ [($120x17+$400x2+$2,800)/($500x17+$800x2 +$4,000)]=$650,000 c. S*=[$390,000+$180,000/(1-40%)]/{[($500-$120)x 850+ ($800-$400)x 100+ ($4,000-$2,800)x 50]/($500 x 850+ $800 x 100+ $4,000 x 50)}= $1,150,000 d. Break-even S*=$420,000/[($120+$400x4+$2,800x2)/($500+$800x4 +$4,000x2)]=$1,202,290 After-tax profit= [($500-$120)x100+ ($800-$400)x400+ ($4,000-$2,800)x 200$420,000] x (1-40%)= $10,800 There is a decrease in after tax profit when changing the product mix, so if the laboratory’s managers seek to maximize the company’s after-tax earnings, this change would not be a good idea.

4-51 a. If the price were cut from $3700 to $325, the Sales Revenue would increase from $2,220,000 ($370 x 6,000) to $2,275,000 ($325 x 7,000), Costs would increase from $1,830,000 ($305 x 6,000) to $2,005,000 ($150 x 7,000+ 360,000 + $25 x 7,000+ 420,000), and Income would decrease from $390,000 ($2,220,000- $1,830,000) to $270,000 ($2,275,000- $2,005,000) b. Incremental Revenue $50,000 Incremental Cost Opportunity cost from loss from sale($370 x 1,000) (370,000) Variable costs decrease by $175 x 1,000) 175,000 Net...