Please Fill in the boxes either filled or outlined in yellow! Thank you so much!
ID: 2465440 • Letter: P
Question
Please Fill in the boxes either filled or outlined in yellow! Thank you so much!
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 47,000 units of each product. Sales and costs for each product follow Sales Variable costs Product T Product O $ 813,100 $813,100 81,310 Contribution margin Fixed costs 325,240 731,790 194,240 600,790 94240 600,790 ncome before taxes Income taxes (30% rate) 39,300 39,300 Net income $ 91,700 91,700Explanation / Answer
Solution:
1)
Contribution Margin Ratio = Contribution Margin / Sales x 100
Product T = $325,240 / $813,100 x 100 = 40% or 0.40
Product O = $731,790 / $813,100 x 100 = 90% or 0.90
Break Even Points in dollars = Fixed Cost / Contribution Margin Ratio
Product T = $194,240 / 0.40 = $485,600
Product O = $600,790 / 0.90 = $667,544
2)
VANNA Co.
Forecasted Contribution Margin Income Statement
Product T
Product O
Total
Units
$ per unit
Total
$ per unit
Total
Sales
30,000
$17.30
$519,000
$17.30
$519,000
$1,038,000
Variable Costs
$10.38
$311,400
$1.73
$51,900
$363,300
Contribution Margin
$6.92
$207,600
$15.57
$467,100
$674,700
Fixed Costs
$194,240
$600,790
$795,030
Income before taxes
$13,360
($133,690)
($120,330)
Income taxes @ 30%
$4,008
($40,107)
($36,099)
Net Income /(loss)
$9,352
($93,583)
($84,231)
3)
VANNA Co.
Forecasted Contribution Margin Income Statement
Product T
Product O
Total
Units
$ per unit
Total
$ per unit
Total
Sales
61,000
$17.30
$1,055,300
$17.30
$1,055,300
$2,110,600
Variable Costs
$10.38
$633,180
$1.73
$105,530
$738,710
Contribution Margin
$6.92
$422,120
$15.57
$949,770
$1,371,890
Fixed Costs
$194,240
$600,790
$795,030
Income before taxes
$227,880
$348,980
$576,860
Income taxes @ 30%
$68,364
$104,694
$173,058
Net Income (loss)
$159,516
$244,286
$403,802
VANNA Co.
Forecasted Contribution Margin Income Statement
Product T
Product O
Total
Units
$ per unit
Total
$ per unit
Total
Sales
30,000
$17.30
$519,000
$17.30
$519,000
$1,038,000
Variable Costs
$10.38
$311,400
$1.73
$51,900
$363,300
Contribution Margin
$6.92
$207,600
$15.57
$467,100
$674,700
Fixed Costs
$194,240
$600,790
$795,030
Income before taxes
$13,360
($133,690)
($120,330)
Income taxes @ 30%
$4,008
($40,107)
($36,099)
Net Income /(loss)
$9,352
($93,583)
($84,231)