Multiple Product Planning with Taxes ABC had the following contribution income s
ID: 2426608 • Letter: M
Question
Multiple Product Planning with Taxes
ABC had the following contribution income statement:
(A) With the current cost structure, including fixed costs of $234,000, what dollar sales volume is required to provide an after-tax net income of $270,000?
Do not round until your final answer. Round your answer to the nearest dollar.
(B)
Prepare an abbreviated contribution income statement to verify that the solution to part (a) will provide the desired after-tax income.
Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.
ABC COMPANYContribution Income Statement
For the Year 2012 Sales $1,000,000 Variable costs Cost of goods sold $440,000 Selling and administrative 200,000 (640,000) Contribution margin 360,000 Fixed Costs Factory overhead 154,000 Selling and administrative 80,000 (234,000) Before-tax profit 126,000 Income taxes (39%) (49,140) After-tax profit $76,860
Explanation / Answer
(A) Before tax net income = 270000/61% = 442623
Sales = (234000 + 442623)/36%
= 1879508
(B)
Sale 1879508 Less: Variable cost @64% of sales 1202885 Contribution margion 676623 Less: Fixed cost 234000 Net income before tax 442623 Less: Tax @39% 172623 Net income after taxes 270000Related Questions
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