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ACT 5140 – Accounting for Decision Makers
Chapter 3
Question #1
The Samantha Corporation sells only one product. The following is budgeted information for
that product:
Annual production and sales capacity (units)
Budgeted selling price
Variable cost of goods sold
Fixed manufacturing costs

80,000
\$150 per unit
\$45 per unit
\$740,000
\$15 per unit
\$700,000

Samantha’s corporate tax rate is 35%.
a) How many units does Samantha need to sell to breakeven?
b) How much revenue does Samantha need to generate to breakeven?
c) How many units does Samantha need to sell to earn an operating profit (before taxes) of
\$360,000?
d) How much revenue does Samantha need to generate to earn net income (after taxes) of
\$585,000?
e) Assume Samantha is currently producing and selling 32,000 units. By what percentage
will operating income change if sales increase by 10% from 32,000 units? Be sure to
f) Assume Samantha is currently producing and selling 32,000 units. By what percentage
will operating income change if sales decrease by 8% from 32,000 units? Be sure to

Question #2
A production company is planning to sell tickets to a show for \$150 each. It’s budgets variable
costs are \$20 per attendee. Total fixed costs are estimated to be \$130,000. The theatre can
accommodate up to 800 people because of safety concerns. What should the production company
do? Why? Be specific in your response.
Question #3
The following is budgeted information for the Joseph Corporation:
Annual production &amp; sales
Projected selling price
Direct Production Cost Information
Materials (per unit)
Direct Labor (per unit)

Product 1
30,000
\$55

Product 2
10,000
\$120

\$9
\$15

\$16
\$25