Answered: Henna Co. produces and sells two…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Henna 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 58,000 units of each product. Sales and costs for each product follow.

	Product T		Product O
Sales		$	974,400	$	974,400
Variable costs			779,520		194,880
Contribution margin			194,880		779,520
Fixed costs			46,880		631,520
Income before taxes			148,000		148,000
Income taxes (32% rate)			47,360		47,360
Net income		$	100,640	$	100,640

3. Assume that the company expects sales of each product to increase to 72,000 units next year with no change in unit selling price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 32% tax rate). (Round "per unit" answers to 2 decimal places.)

HENNA CO.
Forecasted Contribution Margin Income Statement
Product T
Product O
Total
Units
$ Per unit
Total
S Per unit
Total
Sales
Variable cost
Contribution margin
Fixed costs
Income (Loss) before taxes
income taxes (tax benefit)
Net income (loss)

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