Assume that the company expects sales of each product to decline to 37,000 units
ID: 2561933 • Letter: A
Question
Assume that the company expects sales of each product to decline to 37,000 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 32% tax rate). Also, assume that any loss before taxes yields a 32% 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 68,000 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 32% tax rate). (Round "per unit" answers to 2 decimal places.)
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 37,000 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 32% tax rate). Also, assume that any loss before taxes yields a 32% tax savings. (Round "per unit" answers to 2 decimal places. Enter losses and tax benefits, if any, as negative values.)
HENNA CO. Forecasted Contribution Margin Income Statement Product T Product O Total Units $ Per unit Total $ Per unit Total Sales $16.40 $16.40 $0 $0 Variable cost $9.84 0 $3.28 0 0 Contribution margin $6.56 0 $13.12 0 0 Fixed costs 210,240 564,480 (354,240) Income before taxes (210,240) (210,240) Income taxes (tax benefit) ???????? ???????? Net income (loss)
Explanation / Answer
HENNA CO. Forecasted Contribution Margin Income Statement Product T Product O Total Units $ Per unit Total $ Per unit Total Sales 37000 16.4 606800 16.4 606800 1213600 Variable cost 37000 9.84 364080 3.28 121360 485440 Contribution margin 37000 6.56 242720 13.12 485440 728160 Fixed costs 210240 5,64,480 774720 Income before taxes 32480 -79040 -46560 Income taxes (tax benefit) 10393.6 -25292.8 -14899.2 Net income (loss) 22086.4 -53747.2 -31660.8 HENNA CO. Forecasted Contribution Margin Income Statement Product T Product O Total Units $ Per unit Total $ Per unit Total Sales 68000 16.4 1115200 16.4 1115200 2230400 Variable cost 68000 9.84 669120 3.28 223040 892160 Contribution margin 68000 6.56 446080 13.12 892160 1338240 Fixed costs 210240 5,64,480 774720 Income before taxes 235840 327680 563520 Income taxes (tax benefit) 75468.80 104857.60 180326.40 Net income (loss) 160371.20 222822.40 383193.6 Break Even Product T Product O CM Ratio =Contribution/Sales 40.00% 80.00% Break-even point in dollar sales= Fixed Cost/CM Ratio 525600 705600
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