70.2K

Verified Solution

Link Copied!

Multiple Product Planning with Taxes In the year 2008, Wiggins Processing Company had the following contribution income statement:

WIGGINS PROCESSING COMPANY Contribution Income Statement For the Year 2008
Sales		$1,000,000
Variable costs
Cost of goods sold	$440,000
Selling and administrative	200,000	(640,000)
Contribution margin		360,000
Fixed Costs
Factory overhead	190,000
Selling and administrative	80,000	(270,000)
Before-tax profit		90,000
Income taxes (39%)		(35,100)
After-tax profit		$54,900

HINT: Round the contribution margin ratio to two decimal places for your calculations below.

(a) Determine the annual break-even point in sales dollars. $Answer

(b) Determine the annual margin of safety in sales dollars. $Answer (c) What is the break-even point in sales dollars if management makes a decision that increases fixed costs by $36,000? Answer (d) With the current cost structure, including fixed costs of $270,000, what dollar sales volume is required to provide an after-tax net income of $150,000?

Do not round until your final answer. Round your answer to the nearest dollar. $Answer

(e) Prepare an abbreviated contribution income statement to verify that the solution to part (d) will provide the desired after-tax income.

Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.

WIGGINS PROCESSING COMPANY Income Statement For the Year 2008
Sales	$Answer
Variable costs	Answer
Contribution margin	Answer
Fixed costs	Answer
Net income before taxes	Answer
Income taxes (39%)	Answer
Net income after taxes	$Answer

Answer & Explanation Solved by verified expert

See Answer