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 50,000 units of each product. Sales and costs for each product follow.

	Product T				Product O
Sales		$	2,000,000			$	2,000,000
Variable costs			1,600,000				250,000
Contribution margin			400,000				1,750,000
Fixed costs			125,000				1,475,000
Income before taxes			275,000				275,000
Income taxes (32% rate)			88,000				88,000
Net income		$	187,000			$	187,000

1.	Compute the break-even point in dollar sales for each product. (round to whole dollar.)

2.	Assume that the company expects sales of each product to decline to 33,000 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 32% tax rate). Also, assume that any loss before taxes yields a 32% tax savings.

3.

Assume that the company expects sales of each product to increase to 64,000 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 shown with columns for each of the two products (assume a 32% tax rate). If the sales greatly decrease, which product would experience a greater loss? Describe some factors that might have created the different cost structures for these 2 products.