Question

can you please explain in detail how required is derived from given?

PROBLEM 8B GIVEN: PRODUCT A PRODUCT B PRODUCT C 14 45.00% 30.00% CM/UNIT MIX % FC TAX RATE AFTER-TAX NI 25.00% 171,000 40% 45,600 REQUIRED PREPARE A COMPLETE INCOME STATEMENT REFLECTING THE ABOVE DATA PRODUCT A PRODUCT B PRODUCT C TOTAL CM/UNIT MIX % WIA CM/UNIT 25.00% 2.00 30.00% 1.20 14 45.00% 6.30 9.50 PRE-TAX NI 76,000 PRODUCT A PRODUCT B PRODUCT C TOTAL 6,500 7,800 11,700 26,000 UNITS CM/UNIT 14 TOTAL CM 52,000 31,200 163,800 FC PT TAX 247,000 171,000 76,000 30,400 45,600 AT

Answer 1

Explanation for working is given below

The given excel is all about sales mix and Breakeven point Contribution margin is Sale price minus variable cost Weighted average contribution is calculated multiplying each product contribution by sales mix Product A Product B Total 25% 30% 100% Sales mix Contribution per unit Weighted contribution Product C 45% $14.00 $6.30 $8.00 $2.00 $4.00 $1.20 $9.50 Below is the target to be generated from 3 products Fixed cost $171,000 Pre tax income $76,000 ($45,600/1-0.40) Total Target $247,000 Fixed cost is given Since after tax income is given it is adjusted for pre tax Above total target should be divided by weighted average contribution to get total units to be sold Units Total Units at Break even point Total Target weighted Contribution margin $247,000 $9.50 26,000 now this 26,000 should be divided to 3 products in sales mix Sales mix Multiply 26,000 units by sales mix Product A 25% 6,500 Product 30% 7,800 Product C 45% 11,700 Total 100% 26,000 above answer is cross checked by below working Product A Product Units 6,500 7,800 Contribution per unit $8.00 $4.00 Total contribution $52,000 $31,200 Less: Fixed cost Net Income before tax Tax at 40% Net Income after tax Product C 11,700 $14.00 $163,800 Total 26,000 $247,000 $171,000 $76,000 $30,400 $45,600 check above it matches