(d) With the current cost structure, including fixed costs of $266,000, what dollar sales volume is required to provide an after-tax net income of $250,000?Do not round until your final answer. Round your answer up to the nearest dollar.$(e) Prepare an abbreviated contribution income statement to verify that the solution to part (d) will provide the desired after-tax income.Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.WIGGINS PROCESSING COMPANYIncome StatementFor the Year 2008$SalesVariable costsContribution marginFixed costsNet income before taxesIncome taxes (37%)Net income after taxes $Check Multiple Product Planning with TaxesIn the year 2008, Wiggins Processing Company had the following contribution income statement:WIGGINS PROCESSING COMPANYContribution Income StatementFor the Year 2008SalesVariable costsCost of goods soldSelling and administrativeContribution marginFixed CostsFactory overheadSelling and administrativeBefore-tax profitIncome taxes (37%)After-tax profit$1,000,000$420,000200,000 (620,000)380,000186,00080,000 (266,000)114,000(42,180)$71,820HINT: Round contribution margin ratio to two decimal places for your calculations below.(a) Determine the annual break-even point in sales dollars.$(b) Determine the annual margin of safety in sales dollars.$(c) What is the break-even point in sales dollars if management makes a decision that increases fixed costs by $76,000?

Contribution margin ratio = Contribution/ total sales Contribution= Sales - Variable costa) Annual break even point in sales is shown below: Contribution margin ratio = (Contribution / Sales)*100 = ($320,000/$10,00,000)*100 = 32% Annual break even point in sales = Fixed Cost / Contribution margin ratio = $266,000/ 32% = $831,250 b) Annual margin of safety in $ Margin of Safety = Total Sales - Break even Sales Margin of safety = $10,00,000 - $831,250 Margin of safety = $168,750 c) Break even point in $ if fixed costs incurred increased by $ 76,000 Revised fixed costs = $ 266,000 + $ 76,000 Revised fixed costs = $342,000 Contribution margin ratio = 32% Break even point in $ = Revised fixed cost / Contribution margin ratio Break even point in $ = $342,000 / 32% Break even point in $ = $10,68,750 d) Computation of sales volume is enumerated as below if required income after tax is $250,000 Required income after tax = $250,000 Tax rate = 37% Required income before tax = $396,825 [$250,000 / 63% (100%-37%)] Value of sales in $ = (Fixed cost + required income before tax) / Contribution margin ratio Value of sales in $ = ($266,000+$396,825) / 32% Value of sales in $ = $20,71,328 e) Contribution margin income statement for Wiggins: Contribution Format Income Statement Sales $20,71,328.12 Less: Variable Cost (68%) $14,08,503.12 Contribution Margin (32%) $6,62,825 Less: Fixed Costs $2,66,000.00 Income before tax $3,96,825 Less: Tax @ 37% $1,46,825 Net Income after tax $2,50,000

Business

Accounting

d) With the current cost structure, including fixed costs of $266,000, what dollar sales volume is required to provide an after-tax net income of $250,000? Do not round until your final answer. Round your answer up to the nearest dollar. e) Prepare an abbreviated contribution income statement to verify that the solution to part (d) will provide the desired after-tax income. tound your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers. WIGGINS PROCESSING COMPANY Income Statement For the Year 2008 $ Sales Variable costs Contribution margin Fixed costs Net income before taxes Income taxes (3796) Net income after taxes $ Check

d) With the current cost structure, including fixed costs of $266,000, what dollar sales volume is required to provide an after-tax net income of $250,000? Do not round until your final answer. Round your answer up to the nearest dollar. e) Prepare an abbreviated contribution income statement to verify that the solution to part (d) will provide the desired after-tax income. tound your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers. WIGGINS PROCESSING COMPANY Income Statement For the Year 2008 $ Sales Variable costs Contribution margin Fixed costs Net income before taxes Income taxes (3796) Net income after taxes $ Check

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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Question

(d) With the current cost structure, including fixed costs of $266,000, what dollar sales volume is required to provide an after-tax net income of $250,000?
Do not round until your final answer. Round your answer up to the nearest dollar.
$
(e) Prepare an abbreviated contribution income statement to verify that the solution to part (d) will provide the desired after-tax income.
Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.
WIGGINS PROCESSING COMPANY
Income Statement
For the Year 2008
$
Sales
Variable costs
Contribution margin
Fixed costs
Net income before taxes
Income taxes (37%)
Net income after taxes $
Check

Multiple Product Planning with Taxes
In the year 2008, Wiggins Processing Company had the following contribution income statement:
WIGGINS PROCESSING COMPANY
Contribution Income Statement
For the Year 2008
Sales
Variable costs
Cost of goods sold
Selling and administrative
Contribution margin
Fixed Costs
Factory overhead
Selling and administrative
Before-tax profit
Income taxes (37%)
After-tax profit
$1,000,000
$420,000
200,000 (620,000)
380,000
186,000
80,000 (266,000)
114,000
(42,180)
$71,820
HINT: Round contribution margin ratio to two decimal places for your calculations below.
(a) Determine the annual break-even point in sales dollars.
$
(b) Determine the annual margin of safety in sales dollars.
$
(c) What is the break-even point in sales dollars if management makes a decision that increases fixed costs by $76,000?

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