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Diego Motors

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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?

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Solution Summary

This solution is comprised of a detailed explanation to calculate how many cars must Diego Motors sell each month to break even and how many cars must be sold each month to reach the target monthly net income of $54,000.

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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 ...

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