NO.45 What dollar sales volume, to the nearest dollar, would be required in Year 2 to earn the same net income as in Year 1?
To earn the same net income in Year 2 as in Year 1. the contribution margin must equal the sum of the Year 1 pretax operating in Mme and the Year 2 fixed costs. The pretax operating income is calculated as US $3,429,360 $9,000,000 – $4,050,000 variable +coots
-$1.520.640 fixed costs). Fixed costs in Year 2 will be the same as in 1 year except for an increase of I IS $29,520 in fixed selling expenses, a total of US $1,550,160 $1.520014U as previously calculated + $29.520). The desired Year 2 sales volume must equal the Year 2 contribution margin of US $4,979,520 $3.429.360 desired pretax operating income + $1,550,160 fixed coats in year 2) divided by the contribution margin ratio CMR). The CMR may be determined from the unit price constant at US $9,000,000 +150,000 units = US $60 per unit) and unit variable cost data. Unit direct materials cost in Year 2 will increase by 10% to US $13.20 [$1.l $1.800.000 – 150,000 units)]. Unit direct labor cost in Year 2 is given as US $5.40. Unit variable overhead cost is constant at US $720 $1.080.000 150,000 units). Unit variable selling expense is constant at US$3.00 $450,000 + 150,000 units). Thus, total unit variable cost is US $28.80 $13.20 + $5.40 + $7.20 + $3.00), and the UCM is US $31.20 $60 unit selling price -1001 1101 The CMR is therefore US $.52 $31.20
-$60.00), and the desired Year 2 sales volume is US $9,576,1- oil [$4,979,520 CM – $.52).

Data regarding Year 1 operations for an enterprise that had no beginning or ending The enterprise estimates that next year direct materials costs will increase by 10% and direct labor costs will increase by US $0.60 per unit to US $5.40 per unit. In addition, fixed selling expenses will increase by US $29.520_ All other costs will be incurred at the same rates or amounts as the current year.