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 50,000 units of each product. Sales and costs for each product follow.

Product T Product O Sales $ 800,000 $ 800,000 Variable costs 560,000 100,000 Contribution margin 240,000 700,000 Fixed costs 100,000 560,000 Income before taxes 140,000 140,000 Income taxes (32% rate) 44,800 44,800 Net income $ 95,200 $ 95,200 HENNA cO Forecasted Contribution Margin Income Statement Product T Product O Total Units $ Per unit Total $ Per unit Total Contribution margin Net income (loss)

Explanation / Answer

Product T Product O Total Units Per unit Total Per unit Total Total Sales 64000 16 1024000 16 1024000 2048000 Variable costs 11.2 716800 2 128000 844800 Contribution margin 4.8 307200 14 896000 1203200 Fixed costs 100000 560000 660000 Income before taxes 207200 336000 543200 Income taxes (32% rate) 66304 107520 173824 Net income(loss) 140896 228480 369376

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