Question

Required information [The following information applies to the questions displayed below.] Cincinnati Tool Company (CTC) manufactures a line of electric garden tools that are sold in general hardware stores. The company's controller, Will Fulton, has just received the sales forecast for the coming year for CTC's three products: hedge clippers, weeders, and leaf blowers. CTC has experienced considerable variations in sales volumes and variable costs over the past two years, and Fulton believes the forecast should be carefully evaluated from a cost-volume-profit viewpoint. The preliminary budget information for 20x2 follows: Unit sales Unit selling price Variable manufacturing cost per unit Variable selling cost per unit Weeders 50,000 $ 28 13 Hedge Clippers Leaf Blowers 50,000 100,000 $ 36 $ 48 12 25 5 For 20x2, CTC's fixed manufacturing overhead is budgeted at $2,000,000, and the company's fixed selling and administrative expenses are forecasted to be $600,000. CTC has a tax rate of 40 percent. Required: 1. Determine CTC's budgeted net income for 20x2. Budgeted net income

Answer 1

	Weeders	Hedge Clippers	Leaf Blowers	Total
Unit Sales	50,000	50,000	100,000
Sales Revenue	1,400,000	1,800,000	4,800,000	8,000,000
Variable manufacturing cost	650,000	600,000	2,500,000	3,750,000
Variable selling cost	250,000	200,000	600,000	1,050,000
Contribution Margin	500,000	1,000,000	1,700,000	3,200,000
Fixed manufacturing overhead				2,000,000
Fixed selling and Admin expenses				600,000
Income before tax				600,000
Less: Tax Expenses				240,000
Net Income				360,000
Hence, budgeted Net income = $360,000
2'
	Weeders	Hedge Clippers	Leaf Blowers	Total
Unit Sales	50,000	50,000	100,000	200,000
Sales Revenue	28	36	48
Variable manufacturing cost	13	12	25
Variable selling cost	5	4	6
Contribution Margin per unit	10	20	17
Total contribution Margin	500,000	1,000,000	1,700,000	3,200,000
Weighted average CM per unit				16.00
Break even units = Fixed costs/Weighted average per unit	162,500.00	units
Weeders	40,625.00	units
Hedge Clippers	40,625.00	units
Leaf Blowers	81,250.00	units
Total	162,500.00	units
3'
	Weeders	Hedge Clippers	Leaf Blowers	Total
Unit Sales	50,000	50,000	150,000	250,000
Sales Revenue	28	36	48
Variable manufacturing cost	13	12	30
Variable selling cost	5	5	6
Contribution Margin per unit	10	19	12
Total contribution Margin	500,000	950,000	1,800,000	3,250,000
Weighted average CM per unit				13.00
Break even units = Fixed costs/Weighted average per unit	200,000.00	units
Weeders	40,000.00	units
Hedge Clippers	40,000.00	units
Leaf Blowers	120,000.00	units
Total	200,000.00	units