Assume that the company expect sales each product to decline 27000 units next ye
ID: 2420550 • Letter: A
Question
Assume that the company expect sales each product to decline 27000 units next year with no change in unit sales price. Prepare for sated financial results for the next year following the format of the contribution margin income statement As just shown with columns for each of the two products (assume 32%tax rate ) also assume that any loss before taxes yields 32% tax savings
Assume that the company expects sales of each product to increase 58000 units next year with no change in unit sales price . Prepare forecasted financial results for next year following the format of the contribution margin income statement shown wint columns for each of the two products assume a 32% tax rate ezto E·connect ACCOUNTING Module 5 - Homework - Chapter 18 Questions 2- 4 (of 4) Problem 18-5A Break-even analysis, different cost structures, and income calculations LO C2, A1, F The following information applies to the questions displayed below: Vanna Co. produces and sells two products, T and o. it manufactures these products in separate factories and markets them through different channels. They have no shared costs. This yeat, the company sold 44,000 units of each product. Sales and costs for each product follow Product T Product Sales Variable costs $ 774,400 $ 774,400 464,640 154,880 Contribution margin Fixed costs 309,760 619.520 187,760 497520 Income before taxes income taxes (32% rate) 22,000 122,000 9,040 39.040 Net income 82,960 82.960 References Section Break Problem 1B-5A Break-even analysis, different cost structures, and income calculations LO C2, AL, P4
Explanation / Answer
Sales per unit
Product T : $774,400/44,000=$17.60
Product O : $774,400/44,000=$17.60
Variable cost Per unit
Product T : $464,640/44,000=$10.56
Product O : $154,880/44,000=$3.52
1.
Contribution margine ratio = Contribution / sales *100
Product T : 309,760/ 774,400 *100 = 40%
Product O : 619,520/ 774,400* 100 = 80%
Break even point in $ = Fixed cost /Contribution margine
Product T : 187,760/0.40 =$469,400
Product O : 497520/0.80 = $621,900
2.
Vanna Co. Forcasted Contribution margine income statement
Important Point: since both these products cause income to the same company. and tax is charged on total income not on individual product's income..So first calculate Total Income from these products then apply tax rate.. arrive at Profit after tax figure..
Note: Product O is giving losses that is why.. i mentioned to take total of income before taxing.
3.
Vanna Co. Forcasted Contribution margine income statement
Particulars Product T Product O Total Unit per unit Amount per unit Amount Sales 27000 17.60 475,200 17.60 475,200 950,400 Variable cost 10.56 (285120) 3.52 (95,040) (380,160) Contribution Margin 190,080 380160 570,240 Fixed Cost (187,760) (497,520) (685280) Incom(loss) befor Tax $2,320 (117,360) (115,040) Income tax(32%) Nill Net income(loss) (115,040)Related Questions
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