Blanchard Company manufactures a single product that sells for $180 per unit and

Question

Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $176 per unit. The company's annual fixed costs are $631,000. The sales manager predicts that annual sales of the company's product will soon reach 40,100 units and its price will increase to $201 per unit. According to the production manager, variable costs are expected to increase to $141 per unit but fixed costs will remain at $631,000. The income tax rate is 25%. what amounts of pretax and after-tax income can the company expect to earn from these predicted changes? Prepare a forecasted contribution margin income statement. BLANCHARD COMPANY Forecasted Contribution Margin Income Statement Units $ per unit Sales Variable cost Contribution margin Fixed costs Income before taxes Income taxes Net Income 0

Explanation / Answer

BLANCHARD COMPANY Forecasted Contribution Margin Income Statement Units $ per unit Sales 40,100 $201 $8,060,100 Variable Cost 40,100 $141 $5,654,100 Contribution Margin 40,100 $60 $2,406,000 Fixed Costs $631,000 Income before taxes $1,775,000 Income taxes $443,750 Net Income $1,331,250

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