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a. Assume that the same 11,200 unit volume is maintained in 20XY, but the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $7.50 per unit. Also assume that selling and administrative expense will be 6 percent of sales and amortization will be unchanged. The tax rate is 34 percent. Compute aftertax income for 20XY. (Do not round the intermediate calculations. Round the final answer to nearest whole dollar.) Aftertax income $[ b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Round the aftertax income answer to nearest dollar. Round the final answer to 2 decimal places.) Gain in aftertax income

a. Assume that the same 11,200 unit volume is maintained in 20XY, but the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $7.50 per unit. Also assume that selling and administrative expense will be 6 percent of sales and amortization will be unchanged. The tax rate is 34 percent. Compute aftertax income for 20XY. (Do not round the intermediate calculations. Round the final answer to nearest whole dollar.) Aftertax income $[ b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Round the aftertax income answer to nearest dollar. Round the final answer to 2 decimal places.) Gain in aftertax income

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Raghubhai 

The Quinn Corporation shows the following income statement. The firm uses FIFO inventory accounting. QUINN CORPORATION Income Statement for 28XX Sales Cost of goods sold Gross profit Selling and administrative expense Amortization Operating profit Taxes (34%) Aftertax income $145,600 (11,200 units at $13.00) 84,000 (11,200 units at $7.50) 61,600 8,736 12,500 40,364 13,724 $26,640 a. Assume that the same 11,200 unit volume is maintained in 20XY, but the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $7.50 per unit. Also assume that selling and administrative expense will be 6 percent of sales and amortization will be unchanged. The tax rate is 34 percent. Compute aftertax income for 20XY. (Do not round the intermediate calculations. Round the final answer to nearest whole dollar.) Aftertax income b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Round the aftertax income answer to nearest dollar. Round the final answer to 2 decimal places.) Gain in aftertax income
Transcribed Image Text:The Quinn Corporation shows the following income statement. The firm uses FIFO inventory accounting. QUINN CORPORATION Income Statement for 28XX Sales Cost of goods sold Gross profit Selling and administrative expense Amortization Operating profit Taxes (34%) Aftertax income $145,600 (11,200 units at $13.00) 84,000 (11,200 units at $7.50) 61,600 8,736 12,500 40,364 13,724 $26,640 a. Assume that the same 11,200 unit volume is maintained in 20XY, but the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $7.50 per unit. Also assume that selling and administrative expense will be 6 percent of sales and amortization will be unchanged. The tax rate is 34 percent. Compute aftertax income for 20XY. (Do not round the intermediate calculations. Round the final answer to nearest whole dollar.) Aftertax income b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Round the aftertax income answer to nearest dollar. Round the final answer to 2 decimal places.) Gain in aftertax income
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