Stam Co. produces and sells two products, BB and TT. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for each product follow.

Required
1. Compute the break-even point in dollar sales for each product. (Round the answer to the next whole dollar.)
2. Assume that the company expects sales of each product to decline to 33,000 units next year with no change in the unit selling price. Prepare forecasted financial results for next year following the format of the contribution margin income statement as shown here with columns for each of the two products (assume a 32% tax rate, and that any loss before taxes yields a 32% tax benefit).
3. Assume that the company expects sales of each product to increase to 64,000 units next year with no change in the unit selling prices. Prepare forecasted financial results for next year following the format of the contribution margin income statement as shown here with columns for each of the two products (assume a 32% tax rate).
Analysis Component
4. If sales greatly increase, which product would experience a greater increase in profit? Explain.
5. Describe some factors that might have created the different cost structures for these two products.

Transcribed Image Text:

Product BB Product TT Sales ..*... Variable costs Contribution margin .*$800,000 560,000 240,000 00,000 140,000 44,800 95,200 $800,000 00,000 700,000 560,000 40,000 44,800 95,200 Income before taxes-..······.. Net income