MSQ-01 - Activity Cost & CVP Analysis (Final)

Story manufacturing incurs annual fixed costs of

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22. Story Manufacturing incurs annual fixed costs of $250,000 in producing and selling "Tales." Estimated unit sales for 2001 are 125,000. An after-tax income of $75,000 is desired by management. The company projects its income tax rate at 40 percent. What is the maximum amount that Story can expend for variable costs per unit and still meet its profit objective if the sales price per unit is estimated at $6? MSQ-01 Page 8
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23. CGW Corporation sells Product T at a unit price of P5 deriving annual gross sales of P50,000. The variable cost to produce T is P4.50 per unit and total fixed costs is P10,000. If it increases T’s unit price to P8, a decrease of sales to only 4,000 units would result. The effect of the price increase on CGW’s net income from the sales of Product T will be a: A . P9,000 increase. B. P18,000 decrease. C. P4,000 increase. D. No effect.
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