Final answer:
Helmet-Pro's net income for the last year was calculated by subtracting the total variable costs and fixed costs from the total sales revenue, then adjusting for the 25% tax rate. The after-tax net income was found to be $643,500.
Step-by-step explanation:
To calculate Helmet-Pro Company's net income for last year, we'll use the provided information about the sales price per helmet, variable costs, fixed costs, and the number of helmets sold, in addition to the tax rate. The formula to calculate net income is:
(Sales - Variable Costs - Fixed Costs) * (1 - Tax Rate).
Firstly, we'll find the total sales revenue, which is the product of the number of helmets sold and the price per helmet. Next, we'll calculate the total variable costs by multiplying the variable cost per helmet by the number of helmets sold. The difference between total sales revenue and total variable costs gives us the contribution margin, from which we subtract the fixed costs to find the pre-tax income. Lastly, we calculate the after-tax net income by subtracting the taxes from the pre-tax income using the given tax rate.
Here's the breakdown:
- Price per helmet: $240
- Variable cost per helmet: $96
- Fixed costs: $1,158,000
- Number of helmets sold: 14,000
- Tax rate: 25%
To calculate:
- Total sales revenue = Price per helmet * Number of helmets sold = $240 * 14,000 = $3,360,000
- Total variable costs = Variable cost per helmet * Number of helmets sold = $96 * 14,000 = $1,344,000
- Contribution margin = Total sales revenue - Total variable costs = $3,360,000 - $1,344,000 = $2,016,000
- Pre-tax income = Contribution margin - Fixed costs = $2,016,000 - $1,158,000 = $858,000
- After-tax net income = Pre-tax income * (1 - Tax rate) = $858,000 * (1 - 0.25) = $858,000 * 0.75 = $643,500
Therefore, Helmet-Pro's net income for last year was $643,500.