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

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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