ANSWER THE FOLLOWING QUESTIONS CORRECTLY

CVP Analysis answer questions 3-21 on page 86 and also Chapter 2 Video Case: answer the accompany question on page 59

Diego Motors is a small car dealership. On average, it sells a car for
$25,000, which it purchases from the manufacturer for $22,000. Each month, Diego Motors pays $50,000 in
rent and utilities and $60,000 for salespeople's salaries. In addition to their salaries, salespeople are paid a
commission of $500 for each car they sell. Diego Motors also spends $10,000 each month for local advertisements.
Its tax rate is 40%.

Chapter 2 Video Case

THREE DOG BAKERY: Understanding Cost Terms

“Going to the dogs” has been good for Mark Beckloff and Dan Dye. Back in 1989, they founded the first bakery just for four legged canine friends with little more than the desire to satisfy the finicky palate of their beloved 114-pound, deaf Great Dane, Gracie. The small venture has grown from a single store in downtown Kansas City to more than 40 locations worldwide, including Japan and Korea. Their dog treats are made from

wholesome ingredients such as flour, eggs, carrots, spinach

Chapter 3

3-21 CVP analysis, income taxes. Diego Motors is a small car dealership. On average, it sells a car for $25,000, which it purchases from the manufacturer for $22,000. Each month, Diego Motors pays $50,000 in rent and utilities and $60,000 for salespeople’s salaries. In addition to their salaries, salespeople are paid a commission of $500 for each car they sell. Diego Motors also spends $10,000 each month for local advertisements.

Its tax rate is 40%.

1. How many cars must Diego Motors sell each month to break even?

2. Diego Motors has a target monthly net income of $54,000. What is its target monthly operating income?

How many cars must be sold each month to reach the target monthly net income of $54,000?