Exercise 21-13 Forecasted income statement LO C2 Blanchard Company manufactures

Question

Exercise 21-13 Forecasted income statement LO C2 Blanchard Company manufactures a single product that sells for $206 per unit and whose total variable costs are $200 per unit. The company’s annual fixed costs are $634,000. The sales manager predicts that annual sales of the company’s product will soon reach 40,400 units and its price will increase to $212 per unit. According to the production manager, the variable costs are expected to increase to $144 per unit but fixed costs will remain at $634,000. The income tax rate is 40%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes? Prepare a forecasted contribution margin income statement.

Explanation / Answer

Blanchard Company Forecasted Contribution Margin Income statement Particulars Per unit @40,400 Selling price 212           8,564,800 Variable costs 144           5,817,600 Contribution Margin 68           2,747,200 Fixed costs              634,000 Pre-tax Income'           2,113,200 Income tax @40%              845,280 After tax income           1,267,920

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