Required information Problem 21-5A Break-even analysis, different cost structure

Question

Required information Problem 21-5A Break-even analysis, different cost structures, and income calculations LO C2, A1, P4 The following information applies to the questions displayed below) Henna Co produces and sells two products. T and O. it manufactures these products in se them through different channels. They have no shared costs. This year, the company sold 56,000 units of each product. Sales and costs for each product follow s 929,600 650,720 278,880 132,880 146,000 51,100 Sales Variable costs s 929,600 185,928 43,680 28.60587,680 146,000 51,100 s 94,900 Income before taxes s 94

Explanation / Answer

Working notes-

1. Calculation of selling price per unit

For product T-

Sales = $929600

Sales units = 56000

Selling price per unit= $929600 / 56000

= $16.60

For product O-

Sales = $929600

Sales in units = 56000

Selling price per unit = $929600 / 56000

= $ 16.60

2. Calculation of variable cost per unit =

For product T =

Variable costs = $650720

Sales in units = 56000

Variable cost per unit = $650720 / 56000

= $11.62

For product O =

Variable costs = $185920

Sales in units = 56000

Variable cost per unit = $185920 / 56000

= $3.32

Forecasted contribution margin income statement =

For product T=

Sales= 39000 units × $16.6 = $647400

- Variable costs = 39000 units × $ 11.62 = $453180

Contribution margin = $194220

- Fixed costs = $132880

Income before taxes = $61340

Income taxes (35% rate) = $21469

Net Income = $39871

For product O =

Sales (39000 units × $16.60) = $647400

- variable costs(39000 units × $3.32)= $129480

Contribution margin = $517920

- Fixed costs = $597680

Net loss = $79760

Tax benifit(35% tax rate) = $27916

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