Break-Even After Taxes and Two Levels of Output.

The B.M. Company Limited had the following budgeted income statement based upon production and sales estimates of 20,000 units.

Sales Noss che eas ene $ 400,000 Cost of goods sold:

Direct Materials ............... $ 80,000 Direct. labor's: :.’Sagien sBo«cc e 60,000 Variable Overhead ............. 40,000 Fixed Overheads !:isx¢ aes ent Ss ass 100,000 Total cost of goods sold........... $ 280,000 Grossiprofit. 3... i. seena ie 120,000 Selling and administrative costs:

Variables. 2.000O6e 0)a., $ 30,000 BiXOG th 2s oan Pal Bee Tie SL 40,000 Total selling and administrative costs . 70,000 Net income before taxes .......... $ 50,000 Less : Income taxes (40%) ....... 20,000 Budgeted net income after taxes .... $30,000

(relevant range of 15,000 to 50,000 units)

Required:

a. How many units would the company have to produce and sell to attain a desired net income after taxes of $48,000? Show all calculations.

b. During 20x3 the company produced 25,000 units and sold 20,000 units. All costs and revenue behaved precisely as expected, but net income after taxes was $42,000 instead of the $30,000 budgeted. Why was the net income different from expected?
(SMA adapted)