Tempo Company's fixed budget (based on sales of 16,000 units) for the first quarter reveals the following
FixedBudget
Sales (16,000 units X $211 per unit) 2184,000
Cost of goods sold
Direct materials 322,000
Direct labor 602,000
Production supplies 392,000
Plant manager salary 122,000 14,38,000
Gross profit 13,76,000
Selling expenses
Sales commissions 112,000
Packaging 210,000
Advertising 100,000 422,000
Administrative expenses
Administrative salaries 172,000
Depreciation-office equip. 142,000
Insurance 112,000
Office rent 122,000 548,000
Income from operations 406,000
(1) Compute the total variable cost per unit.
(2) Compute the total fixed costs.
(3) Compute the income from operations for sales volume of 14,000 units.
(4) Compute the income from operations for sales volume of 18,000 units.

Answer:

Part 1

Consider the incremental effects as follows

Sales (2,300 × $75)                              $172,500

Less Variable Costs ( 2,300 × $25)    ($57,500)

Contribution                                          $115,000

Less Fixed Costs                                  ($12,500)

Change in Operating Income             $102,500

Part 2

Consider the incremental effects as follows

Sales (2,300 × $75)                              $172,500

Less Variable Costs ( 2,300 × $25)    ($57,500)

Contribution                                          $115,000

Less Fixed Costs                                  ($12,500)

Change in Operating Income             $102,500

Part 3

Consider the incremental effects as follows

Sales (2,300 × $75)                              $172,500

Less Variable Costs ( 2,300 × $25)    ($57,500)

Contribution                                          $115,000

Less Fixed Costs                                  ($12,500)

Change in Operating Income             $102,500

If Congress votes to increase spending and taxes by the same amount, what is the effect on employment and interest rates

A firm has a tax burden of 0.6, a leverage ratio of 1.2, an interest burden of 0.7, and a return-on-sales ratio of 14%. The firm generates $2.64 in sales per dollar of assets. What is the firm's ROE