Apollo Company’s sales manager (in Exercise 18-10) predicts that annual sales of the company’s product will soon reach 40,000 units and its price will increase to $200 per unit. According to the production manager, the variable costs are expected to increase to $140 per unit but fixed costs will remain at $630,000. The income tax rate is 20%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes? (Hint: Prepare a forecasted contribution margin income statement as in Exhibit 18.20.)
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