mel s male accessories sells wallets and money clips historical 269033
Mel’s Male Accessories sells wallets and money clips. Historically, the firm’s sales have averaged three wallets for every money clip. Each wallet has an $8 contribution margin, and each money clip has a $6 contribution margin. Mel’s incurs fixed cost in the amount of $180,000. The selling prices of wallets and money clips, respectively, are $30 and $15. The corporate wide tax rate is 40 percent.
a. How much revenue is needed to break even? How many wallets and money clips does this represent?
b. How much revenue is needed to earn a pre tax profit of $150,000?
c. How much revenue is needed to earn an after tax profit of $150,000?
d. If Mel’s earns the revenue determined in (b) but does so by selling five wallets for every two money clips, what would be the pre tax profit (or loss)? Why is this amount not $150,000?
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