Computing Sales for a Desired After-Tax Profit Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement. CLIFF CONSULTING Contribution Income Statement For the Year Ended September 30 Sales revenue Variable costs Cost of services Selling and administrative Contribution margin Fixed costs-selling and administrative Before-tax profit Income taxes 21% After-tax profit $2,400,000 $960,000 120,000 1,080,000 1,320,000 880,000 440,000 92,400 $347,600 a. With the current cost structure, including fixed costs of $880,000, what dollar sales revenue is required to provide an after-tax net profit of $250,000? Note: Round up to the nearest dollar, enter $80 for $79.2 $ 2,175,374 x b. Prepare an abbreviated contribution income statement to verify that the solution to requirement a will provide the desired after-tax profit. Note: Round all answers to the nearest dollar, enter $49 for $49.3, or $50 for $49.7 Contribution Income Statement Sales revenue Variable costs Contribution margin Fixed costs Net income before taxes Income taxes (21%) Net income after taxes 5 ÷ $ 0x 0 x $ 1,196,456 ✔ 880,000 ✔ S 0 x # $ 0 x $ 250,000
Computing Sales for a Desired After-Tax Profit Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement. CLIFF CONSULTING Contribution Income Statement For the Year Ended September 30 Sales revenue Variable costs Cost of services Selling and administrative Contribution margin Fixed costs-selling and administrative Before-tax profit Income taxes 21% After-tax profit $2,400,000 $960,000 120,000 1,080,000 1,320,000 880,000 440,000 92,400 $347,600 a. With the current cost structure, including fixed costs of $880,000, what dollar sales revenue is required to provide an after-tax net profit of $250,000? Note: Round up to the nearest dollar, enter $80 for $79.2 $ 2,175,374 x b. Prepare an abbreviated contribution income statement to verify that the solution to requirement a will provide the desired after-tax profit. Note: Round all answers to the nearest dollar, enter $49 for $49.3, or $50 for $49.7 Contribution Income Statement Sales revenue Variable costs Contribution margin Fixed costs Net income before taxes Income taxes (21%) Net income after taxes 5 ÷ $ 0x 0 x $ 1,196,456 ✔ 880,000 ✔ S 0 x # $ 0 x $ 250,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
AM.201.
Transcribed Image Text:Computing Sales for a Desired After-Tax Profit
Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement.
CLIFF CONSULTING
Contribution Income Statement
For the Year Ended September 30
Sales revenue
Variable costs
Cost of services
Selling and administrative
Contribution margin
Fixed costs-selling and administrative
Before-tax profit
Income taxes 21%
After-tax profit
$2,400,000
$960,000
120,000 1,080,000
1,320,000
880,000
440,000
92,400
$347,600
a. With the current cost structure, including fixed costs of $880,000, what dollar sales revenue is required to provide an after-tax net profit of $250,000?
Note: Round up to the nearest dollar, enter $80 for $79.2
$ 2,175,374
x
b. Prepare an abbreviated contribution income statement to verify that the solution to requirement a will provide the desired after-tax profit.
Note: Round all answers to the nearest dollar, enter $49 for $49.3, or $50 for $49.7
Contribution Income Statement
Sales revenue
Variable costs
Contribution margin
Fixed costs
Net income before taxes
Income taxes (21%)
Net income after taxes
5
÷ $
0x
0 x
$
1,196,456 ✔
880,000 ✔
S
0 x
# $
0 x
$
250,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education