Author Question: Skipmar Company produces a molded briefcase that is distributed to luggage stores. The following ... (Read 36 times)

xsk4r3kr0w · **on:** Feb 5, 2023

Skipmar Company produces a molded briefcase that is distributed to luggage stores. The following operating data for the current year has been accumulated for planning purposes.

Sales price	$ 40.00
Variable cost of goods sold	12.00
Variable selling expenses	10.60
Variable administrative expenses	3.00
Annual fixed expenses:
Overhead	$7,800,000
Selling expenses	1,650,000
Administrative expenses	3,150,000

Skipmar can produce 1.5 million cases a year. The projected net income for the coming year is expected to be $1.8 million. Skipmar is subject to a 40% income tax rate.

During the planning sessions, Skipmar's managers have been reviewing costs and expenses. They estimate that the company's variable cost of goods sold will increase 15% in the coming year and that fixed administrative expenses will increase by $150,000. All other costs and expenses are expected to remain the same.

Required:

a.	What amount of sales revenue will Skipmar need to achieve in the coming year

to earn the projected net income of $1.8 million?

b.	What price would Skipmar need to charge for the briefcase in the coming year

to maintain the current year's contribution margin ratio?

ladan86 · **Reply #1 on:** Feb 5, 2023

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