Letter Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for each product follow.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Assume that the company expects sales of each product to increase to 64,000 units next year with no change in unit sales price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 32% tax rate).

 

Letter Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for each product follow.

Product T Product O
Sales....
$800,000
$800,000
Variable costs...
560,000
100,000
Contribution margin
240,000
700,000
Fixed costs...
100,000
560,000
Income before taxes
140,000
140,000
Income taxes (32% rate)
44,800
44,800
Net income
$ 95,200
$ 95,200
Transcribed Image Text:Product T Product O Sales.... $800,000 $800,000 Variable costs... 560,000 100,000 Contribution margin 240,000 700,000 Fixed costs... 100,000 560,000 Income before taxes 140,000 140,000 Income taxes (32% rate) 44,800 44,800 Net income $ 95,200 $ 95,200
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