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. Sales Variable costs Contribution margin Fixed costs Income before taxes Income taxes (32% rate) Net income Product T Producto $2,000,000 $2,000,000 1,600,000 250,000 400,000 1,750,000 125,000 1,475,000 275,000 275,000 88,000 88,000 $ 187,000 $ 187,000 Page 731 Required 1. Compute the break-even point in dollar sales for each product. (Round the answer to whole dollars.) 2. Assume that the company expects sales of each product to decline to 30,000 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 benefit. Check (2) After-tax income: T, $78,200, 0, $(289,000) 3. Assume that the company expects sales of each product to increase to 60,000 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). (3) After-tax income: T, $241,400; 0, $425,000 Analysis Component 4. If sales greatly decrease, which product would experience a greater decrease in net income? Sales in units Sales Price per unit Variable cost per unit Fixed cost Income tax rate Product T Product O 50,000 50,000 40 40 32 5 125,000 32% 32% Henna Co. Product Product O Sales Variable Cost Contribution Margin Income before taxes Income tax Net Income