Problem: In Year 1, Jay Company expects to sell 2,243 units at $110 per unit. Sales are expected to increase 25% each year for years 2-4. The unit sales price will remain the same. Labor is 23% of sales, Overhead 10%, Materials 5%, and Variable Sales and Admin, 4%. Fixed Costs, are Factory Overhead (2%) and Sales and Admin (4%). Interest expense of $425 is evenly budgeted over the period. The company tax rate is 20%.
a) Create the Sales Budget for the 4-year period.
b) Calculate the variable cost per unit based on the cost given.
c) Create a budgeted income statement for the 4-year period, using all the information provided and calculated.
d) Calculate the CM ratio, Unit CM, Breakeven in units, Breakeven in dollars for the total 4-year period.
e) If sales remain at the budgeted 4-year level, but fixed costs increase to $367,800, and the company wants to achieve target net income of $700,000, recalculate the CM ratio, Unit CM, Breakeven in units, Breakeven in dollars, and Target Breakeven in Units.
f) Create a breakeven chart for Jay Company based on unit increments of 250 and the revised fixed costs of $367,800. (Hint: You want to graph sales, fixed costs and total costs (total variable and fixed) on one scatter plot.)
| |
1 |
2 |
3 |
4 |
Total |
| Expected Sales (units) |
2,243 |
2,804 |
3,505 |
4,381 |
12,932 |
| Unite Sales Price |
$110 |
$110 |
$110 |
$110 |
|
| Total Sales |
|
|
|
|
|