Crest Industries sells a single model of satellite radio receivers for use in the home

Exercise 3-33 CVP with Income Taxes

Crest Industries sells a single model of satellite radio receivers for use in the home. The radios have the following price and cost characteristics:

Sales Price …………………………….. $ 80 per radio
Variable costs ………………………. $32 per radio
Fixed costs ……………………………... $360.00 per month

Crest is subject to an income tax rate of 40 percent.

Required
How many receivers must Crest sell earn a monthly operating profit of $90,000 after taxes?



Click here for the solution: Crest Industries sells a single model of satellite radio receivers for use in the home

Iridium Corp. has spent $3.5 billion over the past decade developing a satellite, based telecommunication system

Iridium Corp. has spent $3.5 billion over the past decade developing a satellite, based telecommunication system. It is currently trying to decide whether to spend an additional $350 million on the project. The firm expects that this outlay will finish the project and will generate cash flow of $15 million per year over the next 5 years. The competitor has offered $450 million for the satellites already in orbit. Classify the firm’s outlays as sunk costs or opportunity costs, and specify the relevant cash flows.

Click here for the solution: Iridium Corp. has spent $3.5 billion over the past decade developing a satellite, based telecommunication system