For the most recent year, Triad Company had fixed costs of $170,000 and variable
ID: 2553685 • Letter: F
Question
For the most recent year, Triad Company had fixed costs of $170,000 and variable costs of 60% of total sales revenue, earned $52,000 of net income after taxes, and had an income tax rate of 35%.
Required:
1.
Determine the before-tax income.
2.
Determine the total contribution margin.
3.
Determine the total sales.
4.
Determine the breakeven point in dollar sales.
For the most recent year, Triad Company had fixed costs of $170,000 and variable costs of 60% of total sales revenue, earned $52,000 of net income after taxes, and had an income tax rate of 35%.
Explanation / Answer
1. Before Tax Income = Net Income After Taxes / ( 1 - Income Tax Rate)
= $ 52,000 / ( 1- 35%)
= $ 80,000
Hence the correct answer is $ 80,000
2. Total Contribution Margin = Before Tax Income + Fixed Cost
= $ 80,000 + $ 170,000
= $ 250,000
Hence the correct answer is $ 250,000
3. Total Sales = Total Contribution / 40%
=$ 250,000 / 40%
= $ 625,000
Hence the correct answer is $ 625,000
Note :
Sales = Variable Cost + Contribution Margin
Since Variable Cost = 60%
Hence, Contribution Margin = 100% -60%
= 40%
4. Break Even Point ( in dollars Sales ) = Fixed Cost / Contribution Margin Ratio
= $ 170,000 /40%
= $ 425,000
Hence the correct answer is $ 425,000