Carter Company earned net income of $350,000 last year. This year it wants to earn net income of $450,000. The company's fixed costs are expected to be $300,000, and variable costs are expected to be 70% of sales.
Instructions
(a) Determine the required sales to meet the target net income of $450,000 using the mathematical equation.
(b) Using a CVP income statement format, prove your answer.
2. Logan Company's budgeted sales and direct materials purchases are as follows.
Budgeted Sales Budgeted D.M. Purchases
January $300,000 $60,000
February 330,000 70,000
March 350,000 80,000
Logan's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Hagen's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.
Instructions
(a) Prepare a schedule of expected collections from customers for March.
(b) Prepare a schedule of expected payments for direct materials for March.