The company is formulating its plans for the coming fiscal year. Following is the data used to project the current year's after-tax net income of $110,400. Average selling price $4.00 per box Average Variable Costs: cost of candy 2.00 per box selling expenses 0.40 per box 2.40 per box Annual fixed costs: selling 160,000 administrative 280,000 440,000 Expected annual sales volume (390,000 boxes) 1,560,000 Tax Rate 40% Manufacturers of candy have announced that they will increase prices of their products an average of 15 percent in the coming year due to the increase in raw materials and labor costs. 1. What volume of sales in $ must the company achieve in the coming year to maintain the same net income after taxes as projected for the current year if the selling price of candy remains at $4 per box and the cost of candy increases 15 percent? 2. How many units would have to be sold next year to generate a net income equal 10 percent of revenue?
The company is formulating its plans for the coming fiscal year. Following is the data used to project the current year's after-tax net income of $110,400. Average selling price $4.00 per box Average Variable Costs: cost of candy 2.00 per box selling expenses 0.40 per box 2.40 per box Annual fixed costs: selling 160,000 administrative 280,000 440,000 Expected annual sales volume (390,000 boxes) 1,560,000 Tax Rate 40% Manufacturers of candy have announced that they will increase prices of their products an average of 15 percent in the coming year due to the increase in raw materials and labor costs. 1. What volume of sales in $ must the company achieve in the coming year to maintain the same net income after taxes as projected for the current year if the selling price of candy remains at $4 per box and the cost of candy increases 15 percent? 2. How many units would have to be sold next year to generate a net income equal 10 percent of revenue?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The company is formulating its plans for the coming fiscal year. Following is the data used to project the current year's after-tax net income of $110,400.
| Average selling price | $4.00 per box |
| cost of candy | 2.00 per box |
| selling expenses |
0.40 per box |
| 2.40 per box | |
| Annual fixed costs: | |
| selling | 160,000 |
| administrative | 280,000 |
| 440,000 | |
| Expected annual sales volume (390,000 boxes) | 1,560,000 |
| Tax Rate | 40% |
Manufacturers of candy have announced that they will increase prices of their products an average of 15 percent in the coming year due to the increase in raw materials and labor costs.
1. What volume of sales in $ must the company achieve in the coming year to maintain the same net income after taxes as projected for the current year if the selling price of candy remains at $4 per box and the cost of candy increases 15 percent?
2. How many units would have to be sold next year to generate a net income equal 10 percent of revenue?
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