Multiple Product Planning with Taxes (LO3, 4)

~~ Inthe year 2012, Wiggins Processing Company had the following contribution income statement:

WIGGINS PROCESSING COMPANY Contribution Income Statement For the Year 2012 SESE gs. HS ee ee ee eee $1,000,000 Variable costs SGSMONIGOOOS SOG: 2 cies aaisaiad cane $420,000 Selling and administrative............ 200,000 (620,000)

POMREUUON MAIN os. re 380,000 Fixed costs Manufacturing overhead............. 205,000 Selling and administrative............ 80,000 (285,000)

BAGIGNEXR TIONG. deme ooo ae ohare ene 95,000 Income taxes (3690)... . 2).e.c. ee (34,200)

"ULES © £8)[ 1C res Seen eee ee eae $ 60,800 Required

a. Determine the annual break-even point in sales dollars.

b. Determine the annual margin of safety in sales dollars.

c. What is the break-even point in sales dollars if management makes a decision that increases fixed costs by $57,000?

d. 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?

e. Prepare an abbreviated contribution income statement to verify that the solution to requirement

(d) will provide the desired after-tax income. (p. 83)