Multiple Product Planning with Taxes
In the year 2013, Wiggins Processing Company had the following contribution income statement:
WIGGINS PROCESSING COMPANY
Contribution Income Statement
For the Year 2013
|
Sales
|
|
$ 1,200,000
|
|
Less: Variable costs
|
|
|
|
Cost of goods sold
|
$ 420,000
|
|
|
Selling and administrative
|
200,000
|
620,000
|
|
Contribution margin
|
|
580,000
|
|
Less: Fixed costs
|
|
|
|
Manufacturing overhead
|
205,000
|
|
|
Selling and administrative
|
80,000
|
285,000
|
|
Before-tax profit
|
|
295,000
|
|
Income taxes (36%)
|
|
106,200
|
|
After-tax profit
|
|
$ 188,800
|
a. With the current cost structure, including fixed costs of $285,000, what dollar sales volume is required to provide an after-tax net income of $200,000?
b. Prepare an abbreviated contribution income statement to verify that the solution to requirement (a) will provide the desired after-tax income.