Question

Britewaỵ Corporation has prepared the following budget for the month of June Selling Price per Unit Variable Cost Unit Sales per Unit Product A Product B Product C $30.00 20.00 50.00 $15.00 10.00 25.00 50,000 25,000 10,000 The total fixed costs will be $1,000,000. Britewaỵ Corporation's tax rte is 30 percent. Required: a) If the sales mix remains constant, what dollar amount of sales for each product is required to achieve a net income of $400,000 for the year? b) Compute the net income if Briteway sells 170,000 units in the proportion of the current budgeted sales levels for the three products.

Answer 1

Selling price perVariable cost Contribution Sales margin per Contribution margin ratio 50.00% 50.00% 50.00% unit r unit Unit sales revenue Sales mix unit 3 Product A 4 Product B 5 Product C 6 Total 30.00 S20.00 S50.00 $15.00 10.00 S25.00 50,000 $1,500,000 25,000$500,000 0,000 85,000 $2.500,000 60.00% 20.00% 20.00% $15.00 10.00 $25.00 500,000 | 50.00% $1,000,000 $400,000 30% $571,429 ratio Total fixed costs Target income, atter tax Income tax rate Target income, before tax Total targeted sales (Fixed cost+ After tax target profit)/Weighted 12 3.142,857 S1,885,71.4 $628,571 $628,571 13 average contribution mar 15 16 Target sales for Product A Target sales for Product B Target sales for Product C 18 b Product A Product BProduct C Total 20 Sales 21 Less: Variable costs 22 Contribution mar 23 Less: Fixed costs 24 Income from 25 Income tax 26 Net income S3,000,000 $1,000,000 $1,000,000 $5,000,000 500,000 S2.500,000 500,000 S500,000 S2,500,000 1,000,000 S1,500,000 450,000 $1,050,000 1.500,000 S500,000 S1,500,000 S