Requlred Informatlon 2. Assume that the company expects sales of each product to

Question

Requlred Informatlon 2. Assume that the company expects sales of each product to decline to 29,000 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 35% tax rate) Also, assume that any loss before taxes yields 35% tax benefit. (Round "per unit" answers to 2 decimal places. Enter losses and tax benefits, if any, as negative values.) The following information applies to the questions displayed below Henna Co. produces and cells two products, T and O. It manufoctures these products in seporate foctories and markets them through different chennels. They have no shared costs. This year, the company sold 46,000 units of each product Seles and costs for each product follow. HENNA CO Forecasted Contribution Margin Income Statement Product T Product O Total Units S Per unit Total S Per unit Total Product T Product O $ 800.400 $ 800,400 Contribution margin Variable costs 640,320 60,080 E Contribution margin Fixed costs 640,320 32,080 512,320 Net income (loss) Income before texes 128,000 128,000 Income taxes (35% rate) 44.800 44,800 Net income $ 83.200 $ 83.200

Explanation / Answer

Henna Co. Forecasted Contribution margin Income Statement Product T Product O Total Units per unit Total per unit Total Sales        29,000 $       17.40 $     5,04,600 $    17.40 $      5,04,600 $ 10,09,200 Less: Variable expenses $       13.92 $     4,03,680 $       3.48 $      1,00,920 $   5,04,600 Contribution margin $         3.48 $     1,00,920 $    13.92 $      4,03,680 $   5,04,600 Less: Fixed cost $        32,080 $      5,12,320 $   5,44,400 Income before tax $        68,840 $     -1,08,640 $     -39,800 Less: Tax/ Tax savings (@35%) $        24,094 $        -38,024 $     -13,930 Net Income (loss) $        44,746 $        -70,616 $     -25,870 Workings: Product T Product O Selling price per unit: Sales $8,00,400 $ 8,00,400 Number of units sold        46,000         46,000 Selling price per unit $      17.40 $       17.40 Variable cost per unit: Variable cost $6,40,320 $ 1,60,080 Number of units sold        46,000         46,000 Variable cost per unit $      13.92 $         3.48 Contribution margin per unit: Contribution margin $1,60,080 $ 6,40,320 Number of units sold        46,000         46,000 Contribution margin per unit $         3.48 $       13.92

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