# 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 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)

 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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