Cincinnati Tool Company (CTC) manufactures a line of electric garden tools that

Question

Cincinnati Tool Company (CTC) manufactures a line of electric garden tools that are sold in general hardware stores. The company’s controller, Will Fulton, has just received the sales forecast for the coming year for CTC’s three products: hedge clippers, weeders, and leaf blowers. CTC has experienced considerable variations in sales volumes and variable costs over the past two years, and Fulton believes the forecast should be carefully evaluated from a cost-volume-profit viewpoint. The preliminary budget information for 20x2 follows:

For 20x2, CTC’s fixed manufacturing overhead is budgeted at $2,000,000, and the company’s fixed selling and administrative expenses are forecasted to be $600,000. CTC has a tax rate of 40 percent.

Determine CTC’s budgeted net income for 20x2.

Weeders Hedge Clippers Leaf Blowers Unit sales 50,000 50,000 100,000 Unit selling price $ 28 $ 36 $ 48 Variable manufacturing cost per unit 13 12 25 Variable selling cost per unit 5 4 6 Required: 1. Determine CTC's budgeted net income for 20x2. Budgeted net income

Explanation / Answer

SOLUTION

Weeders ($) Line Trimmers ($) Leaf Blowers ($) Total ($) Unit selling price 28 36 48 Variable manufacturing cost 13 12 25 Variable selling cost 5 4 6 Total variable cost 18 16 31 Contribution margin per unit 10 20 17 Unit sales 50,000 50,000 100,000 Total contribution margin 500,000 1,000,000 1,700,000 3,200,000 Fixed manufacturing overhead 2,000,000 Fixed selling and administrative costs 600,000 Total fixed costs 2,600,000 Income before taxes 600,000 Income taxes (40%) 240,000 Budgeted net income 360,000

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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