Blanchard Company manufactures a single product that sells for $310 per unit and

Question

Blanchard Company manufactures a single product that sells for $310 per unit and whose total variable costs are $248 per unit. The company's annual fixed costs are $640,000. The sales manager predicts that annual sales of the company's product will soon reach 41,000 units and its price will increase to $339 per unit. According to the production manager, the variable costs are expected to increase to $256 per unit but fixed costs will remain $640,000. The income tax rate is 20%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?

Explanation / Answer

units $ per unit Total sales 41000 339 13899000 less:variable cost 41000 256 10496000 contribution margin 83 3403000 less:Fixed cost (640000) Income before tax 2763000 less:tax (.20* income before taX) (552600) net income 2210400

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