In a 2-page document, address the following based on the provided company cost data:
- What is the break-even sales in units?
- If Barnwell Brothers is subject to an effective income tax rate of 40%, how many units would Barnwell Brothers have to sell to earn an after-tax profit of $90,000?
- If fixed costs increase $31,500 with no other cost or revenue factors changing, what is the break-even sales in units?
- How would these calculations affect decision making for managers at Barnwell Brothers? Why?
- What recommendation(s) would you suggest for reducing costs at Barnwell Brothers? Justify your recommendations using linear profit modeling.
Barnwell Brothers Company
Data for the Barnwell Brothers Company are as follows:
Sales (100,000 units)
|
|
|
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$500,000
|
Costs
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Fixed
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Variable
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|
Raw material
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$ 0
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$150,000
|
|
Direct labor
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$0
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$100,000
|
|
Factory costs
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$50,000
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$75,000
|
|
Selling and administrative costs
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$55,000
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$25,000
|
|
Total costs
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$105,000
|
$350,000
|
$455,000
|
Operating income
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|
|
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$45,000
|
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