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    Problem 5-5A: Break-even analysis, different cost structures, and income calculations L.O. C3
    Vanna 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, Vanna sold 54,000 units of each
    product. Sales and costs for each product follow.
    Product T Product O
    Sales $ 2,160,000 $ 2,160,000
    Variable costs 1,728,000 270,000
    Contribution margin 432,000 1,890,000
    Fixed costs 135,000 1,593,000
    Income before taxes 297,000 297,000
    Income taxes (38% rate) 112,860 112,860
    Net income $ 184,140 $ 184,140

    Requirement 1:
    Compute the break-even point in dollar sales for each product. (Round your answer to the nearest whole dollar
    amount. Omit the "$" sign in your response.)
    Product T $
    Product O $

    Requirement 2:
    Assume that the company expects sales of each product to decline to 38,000 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 as shown above with columns for each of the two products (assume a 38% tax rate). Also, assume that
    any loss before taxes yields a 38% tax savings. (Negative amount should be indicated by a minus sign. Round
    your answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

    VANNA Co.
    Forecasted Contribution Margin Income Statement
    Product T Product O
    Sales $ $
    Variable costs
    Contribution margin
    Fixed costs
    Income before taxes
    Income taxes (38%)
    Net income $ $
    Requirement 3:

    Assume that the company expects sales of each product to increase to 60,000 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 as shown above with columns for each of the two products (assume a 38% tax rate). (Negative
    amount should be indicated by a minus sign. Round your answer to the nearest whole dollar amount. Omit
    the "$" sign in your response.)

    VANNA Co.
    Forecasted Contribution Margin Income Statement
    Product T Product O
    Sales $ $
    Variable costs
    Contribution margin
    Fixed costs
    Income before taxes
    Income taxes (38%)
    Net income $ $

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    Problem 5-5A: Break-even analysis, different cost structures, and income calculations L.O. C3
    Vanna 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, Vanna sold 54,000 units of each product. Sales and costs for each product follow.

    Product T Product O
    Sales 2,160,000 2,160,000
    Variable costs 1,728,000 270,000
    Contribution margin 432,000 1,890,000
    Fixed costs 135,000 1,593,000
    Income before taxes 297,000 297,000
    Income taxes (38% rate) 112,860 112,860
    Net income 184,140 184,140

    Requirement 1:
    Compute the break-even point in dollar sales for each product. (Round your answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

    We need to ...

    Solution Summary

    This solution is comprised of a detailed explanation to compute the break-even point in dollar sales for each product and prepare forecasted financial results for next year following the format of the contribution margin income statement as shown above with columns for each of the two products (assume a 38% tax rate).

    $2.49

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