[The following information applies to the questions displayed below.] Vanna Co.

Question

[The following information applies to the questions displayed below.]

Vanna Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 41,000 units of each product. Sales and costs for each product follow.

Assume that the company expects sales of each product to increase to 55,000 units next year with no change in unit sales price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 40% tax rate). (Enter all values as positive.)

Vanna Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 41,000 units of each product. Sales and costs for each product follow.

Explanation / Answer

Contribution margin income statement Product T Product O 55000 units Total amount Unit price Total amount Unit price Sales 984500 17.9 984500 17.9 Less Variable cost 590700 10.74 98450 1.79 Contribution margin 393800 7.16 886050 16.11 Less Fixed cost 180560 547510 Income before taxes 213240 338540 Less Income taxes 85296 135416 Net income 127944 203124

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