Question

D.L Marx and​ Company, a manufacturer of quality handmade walnut​ bowls, has had a steady growth in sales for the past 5 years.​ However, increased competition has led Mr. Barnes​, the​ president, to believe that an aggressive marketing campaign will be necessary next year to maintain the​ company's present growth. To prepare for next​ year's marketing​ campaign, the​ company's controller has prepared and presented Mr. Barnes with the following data for the current​ year, 2017​:

Total variable cost per bowl: $12.60Total fixed costs: $184,800Selling price: $28.00
Expected sales, 21500 units: $602,000Income tax rate: %40What is the projected net income for 2017?

Answer 1

The projected net income for 2017 is $87,780

Step-by-step explanation:

Total sales for 2017 = $28.00 x 21,500 = $602,000

Total variable cost per bowl is $12.60

Total variable cost for 2017 = $12.60 x 21,500 = $270,900

Income before tax = Total sales - Total variable cost - Total fixed costs = $602,000 - $270,900 - $184,800 = $146,300

Tax = Income before tax x Income tax rate = $146,300 x 40% = $58,520

The projected net income for 2017 = Income before tax- Tax = $146,300 - $58,520 = $87,780