In the year 2013, Wiggins Processing Company had the following contribution inco
ID: 2464559 • Letter: I
Question
In the year 2013, Wiggins Processing Company had the following contribution income statement: WIGGINS PROCESSING COMPANY Contribution Income Statement For the Year 2013 Sales $ 1,200,000 Variable costs Cost of goods sold $ 420,000 Selling and administrative 200,000 (620,000) Contribution margin 580,000 Fixed Costs Factory overheard 205,000 Selling and administrative 80,000 (285,000) Before-tax profit 295,000 Income taxes (36%) (106,200) After-tax profit $ 188,800 (a) Determine the annual break-even point in sales dollars. Round contribution margin ratio to two decimal places for your calculation. $AnswerIncorrect (b) Determine the annual margin of safety in sales dollars. Use rounded answer from above for calculation. $AnswerIncorrect (c) What is the break-even point in sales dollars if management makes a decision that increases fixed costs by $57,000? Use rounded contribution margin ratio (2 decimal places) for your calculation. $AnswerIncorrect (d) With the current cost structure, including fixed costs of $285,000, what dollar sales volume is required to provide an after-tax net income of $200,000? Use rounded contribution margin (2 decimal places) for calculation. Round your answer to the nearest dollar. $AnswerIncorrect (e) Prepare an abbreviated contribution income statement to verify that the solution to part (d) will provide the desired after-tax income. Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers. WIGGINS PROCESSING COMPANY Income Statement For the Year 2013 Sales $AnswerIncorrect Variable costs (52% of sales) AnswerIncorrect
Explanation / Answer
Wiggins Processing Company Contribution Income Statement for the Year 2013 Details Amt $ Sales 1,200,000 Variable cost of Goods sold 420,000 Bariable selling & Admin 200,000 Total Variable cost 620,000 Contribution Margin 580,000 Contribution Margin Ratio 48.33% Fixed costs Factory Overhead 205,000 Selling & Admin cost 80,000 Total Fixed cost 285,000 Net Operating Income 295,000 Income Tax @36% 106,200 After Tax profit 188,800 a Total Fixed cost 285,000 Contribution Margin Ratio 48.33% BEP Sales in $=285000/48.33%= $ 589,655.17 b Actual Sales = 1,200,000 BEP Sales 589,655.17 Margin Of Safety in Sales $ $ 610,344.83 c Fixed cost increases by 57,000 Total Fixed costs 342,000 Contribution Margin Ratio 48.33% BEP Sales in $=342000/48.33%= $ 707,586.21 d Required after tax income 200,000 Required Net Operating income before tax=200000/64%= 312,500 Add Fixed costs 285,000 Total Contribution required 597,500 Contribution Margin Ratio 48.33% Required sales in $=597500/48.33%= 1,236,207 e Validation Abbreviated Income statement Details Amt $ Sales Revenue 1,236,207 Less Variable cost @(51.67%) 638,707 Contribution Margin 597,500 Less Total fixec costs 285,000 Net Operating Income 312,500 Less Income Tax @36% 112,500 After Tax income 200,000