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Homework answers / question archive / Tasty Company sells a single product

Tasty Company sells a single product. Below were Tasty's monthly total revenue and total cost equation:

Total Revenue = RM 12(Q)

Total Cost = RM 8(Q) + RM10,200

A. Calculate Tasty's contribution margin per unit and calculate the number of units Tasty needed to sell next month to break-even.

B. Calculate the number of units Tasty needed to sell next month to generate an after-tax profit of $1,000 if Tasty Company tax rate is 20% (round to nearest units).

C. Calculate Tasty Margin of Safety if expected sales is 2,600 units per month and what does Tasty Margin of Safety imply about Tasty business.

D. Marketing research indicated that this coming July expected sales is 2,600 units. The sales manager believes the company could increase July sales by 10% if advertising expenditures were increased by $1,000. Would you recommend Tasty to spend the additional costs to advertise its products? Support you recommendation indicating the effect on income if the company increases advertising expenditures.

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