Question

CANTON CORPORATION Income Statement for 20x1 Sales $187,200 (15,600 units at $12.00) Cost of goods sold 109,200 (15,600 units at $7.00) Gross profit $ 78,000 Selling and administrative expense 11,232 Depreciation 10,000 Operating profit $ 56, 768 Taxes (30%) 17,030 Aftertax income $ 39,738 a. Assume in 20X2 the same 15,600-unit volume is maintained but that the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $7.00 per unit. Also assume selling and administrative expense will be 6 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 20X2. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Aftertax income | $ 50,935
all my answers are wrong and i cannot figure out what i'm doing wrong, please help!

Answer 1

a.

After-tax income

$ 52,055

Sales ( 15,600 x $ 13.20 )	$ 205,920
Cost of Good Sold	109,200
Gross Profit	96,720
Selling and Administrative Expenses ( $ 205,920 x 6 % )	12,355
Depreciation	10,000
Operating Profit	74,365
Taxes ( 30 % )	22,310
After-tax Income	52,055

b.

Gain in after-tax income

31 %

c.

After-tax income

$ 26,271

Sales ( 15,600 x $ 11.22 )	$ 175,032
Cost of Goods Sold	117,000
Gross Profit	58,032
Selling and Administrative Expenses	10,502
Depreciation	10,000
Operating Profit	37,530
Taxes ( 30 % )	11,259
After-tax Income	26,271