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Henna Co. produces and sells two products, T and O. It manufactures these products in separate...

Henna Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them thrAssume that the company expects sales of each product to decline to 42,000 units next year with no change in unit selling pri

Henna 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 59,000 units of each product. Sales and costs for each product follow. Sales Variable costs Contribution margin Fixed costs Income before taxes Income taxes (30% rate) Net income Product T $ 997, 109 697,970 299, 130 150, 130 149,000 44,700 $ 104,300 Product O $ 997,100 99,710 897,390 748,390 149,000 44,700 $ 104,300 Problem 18-5A Part 1 Required: 1. Compute the break-even point in dollar sales for each product. (Enter CM ratio as percentage rounded to 2 decimal places.) Product I Contribution Margin Ratio Choose Numerator: 1 Choose Denominator: = Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollars Choose Numerator: 1 Choose Denominator: = Break-Even Point in Dollars Break-even point in dollars Producto Contribution Margin Ratio Contribution margin ratio Break-Even Point in Dollars Break-even point in dollars
Assume that the company expects sales of each product to decline to 42,000 units next year with no change in unit selling price. Prepare forecasted financial results for next year following the format of the contribution margin income statement as just shown with columns for each of the two products (assume a 30% tax rate). Also, assume that any loss before taxes yields a 30% tax benefit. (Round "per unit" answers to 2 decimal places. Enter losses and tax benefits, if any, as negative values.) HENNA CO. Forecasted Contribution Margin Income Statement Product T Producto Units $ Per unit Total $ Per unit Total Total S 0ls 0 0 0 0 Contribution margin 0 0 0 Net income (loss)
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Product T
Contribution Margin ratio
Choose Numerator: / Choose Denominator: = Contribution Margin Ratio
Contribution Margin / Sales = Contribution margin ratio
                   299,130.00 /                                  997,100 = 30.00%
Choose Numerator: / Choose Denominator: = Break-Even Dollars
Fixed costs / Contribution margin ratio = Break-even dollars
$150,130 / 30% =                                       500,433
Product O
Contribution Margin ratio
Choose Numerator: / Choose Denominator: = Contribution Margin Ratio
Contribution Margin / Sales = Contribution margin ratio
                        897,390 /                                  997,100 = 90.00%
Choose Numerator: / Choose Denominator: = Break-Even Dollars
Fixed costs / Contribution margin ratio = Break-even dollars
$748,390 / 90% =                                       831,544
Henna Co.
Forcasted Contribution Margin Income Statement
Product T Product O Total
Units $ per unit Total $ per unit Total
Sales 42,000 $16.90         709,800 $16.90                       709,800    1,419,600
Less: Variable cost 42,000 11.83         496,860 $1.69                         70,980       567,840
Contribution margin $5.07         212,940 $15.21                       638,820       851,760
Less: Fixed costs         150,130                       748,390       898,520
Profit before tax           62,810                     (109,570)       (46,760)
Less: tax                18,843                                (32,871)       (14,028)
Net Income /(Loss)                43,967                                (76,699)       (32,732)
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