Multiple Product Planning with Taxes
Multiple Product Planning with Taxes
In the year 2008, Wiggins Processing Company had the following contribution
income statement:
|
WIGGINS
PROCESSING COMPANY |
||
|
Sales |
$1,000,000 |
|
|
Variable costs |
||
|
Cost of goods sold |
$440,000 |
|
|
Selling and administrative |
200,000 |
(640,000) |
|
Contribution margin |
360,000 |
|
|
Fixed Costs |
||
|
Factory overhead |
154,000 |
|
|
Selling and administrative |
80,000 |
(234,000) |
|
Before-tax profit |
126,000 |
|
|
Income taxes (39%) |
(49,140) |
|
|
After-tax profit |
$76,860 |
(a) Determine the annual break-even point in sales dollars.
$Answer
Correct
(b) Determine the annual margin of safety in sales dollars.
$Answer
Correct
(c) What is the break-even point in sales dollars if management makes a
decision that increases fixed costs by $72,000?
Answer
Correct
(d) With the current cost structure, including fixed costs of $234,000, what
dollar sales volume is required to provide an after-tax net income of $270,000?
(Round your answer to the nearest dollar.)
$Answer
Incorrect
(e) Prepare an abbreviated contribution income statement to verify that the
solution to part (d) will provide the desired after-tax income.
|
WIGGINS
PROCESSING COMPANY |
||
|
Sales |
$Answer Incorrect |
|
|
Variable costs (64% of sales) |
Answer Incorrect |
|
|
Contribution margin (36% of sales) |
Answer Incorrect |
|
|
Fixed costs |
Answer Incorrect |
|
|
Net income before taxes |
Answer Incorrect |
|
|
Income taxes (39%) |
Answer Incorrect |
|
|
Net income after taxes |
$Answer |
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Solution: Multiple Product Planning with Taxes