Question

Required information The following information applies to the questions displayed below.) 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 50,000 units of each product. Sales and costs for each product follow. Sales Variable costs Contribution margin Fixed costs Income before taxes Income taxes (32% rate) Net income Product T $2,000,000 1,600,000 400,000 125,000 275,000 88,000 $ 187,000 Producto $2,000,000 250,000 1,750,000 1,475,000 275,000 88,000 $ 187,000

Answer 1

2	Henna Co.
	Forecasted Contribution margin Income Statement
			Product T		Product O		Total
		Units	per unit	Total	per unit	Total
	Sales	30,000	$               40	$ 12,00,000	$          40	$ 12,00,000	$ 24,00,000
Less:	Variable expenses	30,000	$               32	$   9,60,000	$             5	$   1,50,000	$ 11,10,000
	Contribution margin	30,000	$                  8	$   2,40,000	$          35	$ 10,50,000	$ 12,90,000
Less:	Fixed cost			$   1,25,000		$ 14,75,000	$ 16,00,000
	Income before tax			$   1,15,000		$ -4,25,000	$ -3,10,000
Less:	Tax/ Tax savings (@32%)			$       36,800		$ -1,36,000	$     -99,200
	Net Income (loss)			$       78,200		$ -2,89,000	$ -2,10,800
	Workings:
		Product T	Product O
	Selling price per unit:
	Sales	$ 20,00,000	$ 20,00,000
	Number of units sold	50,000	50,000
	Selling price per unit	$         40.00	$         40.00
	Variable cost per unit:
	Variable cost	$ 16,00,000	$   2,50,000
	Number of units sold	50,000	50,000
	Variable cost per unit	$         32.00	$            5.00
	Contribution margin per unit:
	Contribution margin	$   4,00,000	$ 17,50,000
	Number of units sold	50,000	50,000
	Contribution margin per unit	$            8.00	$         35.00
3	Henna Co.
	Forecasted Contribution margin Income Statement
			Product T		Product O		Total
		Units	per unit	Total	per unit	Total
	Sales	60,000	$               40	$ 24,00,000	$          40	$ 24,00,000	$ 48,00,000
Less:	Variable expenses	60,000	$               32	$ 19,20,000	$             5	$   3,00,000	$ 22,20,000
	Contribution margin	60,000	$                  8	$   4,80,000	$          35	$ 21,00,000	$ 25,80,000
Less:	Fixed cost			$   1,25,000		$ 14,75,000	$ 16,00,000
	Income before tax			$   3,55,000		$   6,25,000	$   9,80,000
Less:	Tax/ Tax savings (@32%)			$   1,13,600		$   2,00,000	$   3,13,600
	Net Income (loss)			$   2,41,400		$   4,25,000	$   6,66,400
	Workings:
		Product T	Product O
	Selling price per unit:
(i)	Sales	$ 20,00,000	$ 20,00,000
(ii)	Number of units sold	50,000	50,000
(i) / (ii)	Selling price per unit	$         40.00	$         40.00
	Variable cost per unit:
(i)	Variable cost	$ 16,00,000	$   2,50,000
(ii)	Number of units sold	50,000	50,000
(i) / (ii)	Variable cost per unit	$         32.00	$            5.00
	Contribution margin per unit:
(i)	Contribution margin	$   4,00,000	$ 17,50,000
(ii)	Number of units sold	50,000	50,000
(i) / (ii)	Contribution margin per unit	$            8.00	$         35.00