Question

Blanchard Company manufactures a single product that sells for $160 per unit and whose total variable costs are $120 per unit. The company’s annual fixed costs are $629,000. The sales manager predicts that annual sales of the company’s product will soon reach 39,900 units and its price will increase to $199 per unit. According to the production manager, variable costs are expected to increase to $139 per unit, but fixed costs will remain at $629,000. The income tax rate is 25%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes? Prepare a forecasted contribution margin income statement.

Answer 1

Following are the solution to the given question:

Step-by-step explanation:

Income statement

sales
`39900* 199 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 7940100\\\\`

The less average cost of variable
`39900* 139 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 5546100 \\\\`

margin for contribution
`2394000\\\\`

Lesser fixed costs
`629000\\\\`

Income from of the company or tax
`1765000 \\\\`

Lower-income tax by
`25\%`
`441250 \\\\`

after-tax revenue
`1323750\\\\`