Henna Co. produces and sells two products, T and O. It manufactures these produc

Question

Henna 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 year, the company sold 42,000 units of each product. Sales and costs for each product follow.

Compute the break-even point in dollar sales for each product. (Enter CM ratio as percentage rounded to 2 decimal places.)

Assume that the company expects sales of each product to decline to 25,000 units next year with no change in unit selling price. Prepare forecasted financial results for next year following the format of the contribution margin income statement as just shown with columns for each of the two products (assume a 35% tax rate). Also, assume that any loss before taxes yields a 35% tax savings. (Round "per unit" answers to 2 decimal places. Enter losses and tax benefits, if any, as negative values.)

Assume that the company expects sales of each product to increase to 56,000 units next year with no change in unit selling price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 35% tax rate). (Round "per unit" answers to 2 decimal places.)

Henna 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 year, the company sold 42,000 units of each product. Sales and costs for each product follow.

Explanation / Answer

Contribution Margin Ratio Choose Numerator: / Choose Denominator: = Contribution Margin Ratio 224,280 / 747,600 = Contribution margin ratio 0.3 30% Break-even point in dollars Choose Numerator: / Choose Denominator: = Break-Even Point in Dollars 108,280 / 30% = Break-even point in dollars 360933 Product O Contribution Margin Ratio 598,080 / 747,600 = Contribution margin ratio 0.8 80% Break-Even Point in Dollars 482,080 / 0.8 = Break-even point in dollars 602600 25000 Product T Product O Sales 445000.00 445,000 Variable costs 311500.00 89,000 Contribution margin 133500.00 356,000 Fixed costs 108280.00 482,080 Income before taxes 25220.00 -126,080 Income taxes (35% rate)/Savings 8827.00 44,128 Net income 16393.00 -81,952 56000 Product T Product O Sales 996800.00 996800.00 Variable costs 697760.00 199360.00 Contribution margin 299040.00 797,440 Fixed costs 108280.00 482,080 Income before taxes 190760.00 315,360 Income taxes (35% rate)/Savings 66766.00 110,376 Net income 123994.00 204,984

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.