The PC Supply Company manufactures memory cards that sell to wholesalers for $2.00 each.
Variable and fixed costs are as follows:
Variable Costs per card:
Manufacturing
Direct materials $0.30
Direct labor 0.25
Factory overhead 0.25
Total: 0.80
Selling and admin. 0.15
Total $0.95
Fixed Costs per
Month:
Factory overhead $4,000
Selling and admin. 3,000
Total $7,000
PC Supply produced and sold 10,000 cards during October 2012. There were no beginning
or ending inventories.
Required:
a. Prepare a contribution income statement for the month of October.
b. Determine PC Supply's monthly break-even point in units.
c. Determine the effect on monthly profit of a 500 unit increase in monthly sales.
d. If PC Supply is subject to an income tax of 40 percent, determine the dollar sales volume that is required to earn a monthly after-tax profit of $15,000.