[The following information applies to the questions displayed below.] Vanna Co.

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[The following information applies to the questions displayed below.]

Vanna 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 41,000 units of each product. Sales and costs for each product follow.

Assume that the company expects sales of each product to decline to 24,000 units next year with no change in unit sales 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 40% tax rate). Also, assume that any loss before taxes yields a 40% tax savings. (Enter Losses and Tax benefits with a minus sign, and all the remaining values as positive numbers.)

Vanna 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 41,000 units of each product. Sales and costs for each product follow.

Explanation / Answer

Forecast Financial Results Particulars Product T Product O Sales 429600 429600 Variable Cost 257760 42960 Contribution Margin 171840 386640 Fixed Costs 180560 547510 Income before taxes -8720 -160870 Income taxes (40% rate) -3488 -64348 Net income -5232 -96522

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