28) Big Ben Golf Accessories makes novelty electronic equipment for golf enthusiasts. One of their most popular accessories is the “Putting Magician.” This electronic device analyses puts and provides instruction on the direction and pace of a put. Although not allowed under the rules amateur golfers have purchased or received as a gift 17,300 of these last year from a total production of 18,000 units. The recommended retail price is $139 and the wholesale price received by Big Ben Golf Accessories is $90.
The company's variable production costs are $62 per unit. Per unit fixed manufacturing costs are $7. Other fixed costs are $65,000 for rent; $290,000 in salaries; $75,000 for a product endorsement. The tax rate is 25%.
a.How many units must be sold to breakeven?
b.What is the amount of sales in dollars required to earn an after-tax profit of $300,000?
29) The parent group of the local university football team organizes an end of training camp bar-b-que dinner each year. The 110 player roster and 12 coaches eat for free, and ticket sales are used along with a fixed amount subsidy to fund the event. Last season 250 meals were produced and served. The following financial statement was prepared by one of the team parents:
Ticket sales $ 1,280
* The deficit was covered by a one-time donation from a parent whose son graduated and is consequently no longer on this years team.
Calculate the price per ticket that must be charged to breakeven based on the following assumptions:
– the number of players and coaches meals remain the same, but the number of meals sold increases by 20
-the fixed costs are the same as last year
-the variable costs per unit are the same as last year
-the subsidy will remain at $3,000
Objective: LO 3-3
30) Better Battery has been in the battery renewal business for four years. It rents a building but owns all of its equipment. All employees are paid a fixed salary except for the busy season (April – June), when temporary help is hired by the hour. Utilities and other operating charges remain fairly constant during each month, except those in the busy season.
Selling prices per battery average $100, except during the busy season. Because a large number of customers buy batteries prior to winter, discounts run above average during the busy season. A 15 percent discount is given when two batteries are purchased at one time. During the busy months selling prices per battery average $90.
The president of Better Battery is somewhat displeased with the company's management accounting system because the cost behaviour pattern displayed by the monthly break-even charts are inconsistent; the busy month's charts are different from the other months of the year. The president is never sure if the company has a satisfactory margin of safety or if it is just above the break-even point.
a.What is wrong with the accountant's computations?
b.How can the information be presented in a better format for the president?