Multiple Product Planning with Taxes

In the year 2017, Pyramid Consulting had the following contribution income statement:

PYRAMID CONSULTING

Contribution Income Statement

For the Year 2017Sales revenue$ 1,300,000Variable costsCost of services$ 420,000Selling and administrative200,000(620,000)Contribution margin680,000Fixed Costs -selling and administrative(285,000)Before-tax profit395,000Income taxes (36%)(142,200)After-tax profit$ 252,800

(a) Determine the annual break-even point in sales revenue.

Roundcontribution margin ratioto two decimal places foryour calculation. Round final answer to nearest dollar.

$Answer

(b) Determine the annual margin of safety in sales revenue.

Use rounded answer from above for calculation.

$Answer

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

Use rounded contribution margin ratio (2 decimal places)foryour calculation. Round your answer UP to the nearest dollar.

$Answer

(d) With the current cost structure, including fixed costs of $285,000, what dollar sales revenue is required to provide an after-tax net income of $200,000?

Use rounded contribution margin (2 decimal places) for calculation. Round your answer UP to the nearest dollar.

$Answer

(e) Prepare an abbreviated contribution income statement to verify that the solution to requirement (d) will provide the desired after-tax income.

Use rounded contribution margin (2 decimal places) for variable cost/contribution margin computations. Round your answers to the nearest dollar. Use rounded answers for subsequent calculations.Do notusenegative signs with any of your answers.

PYRAMID CONSULTING

Income Statement For the Year 2017SalesAnswer

Variable costsAnswer

Contribution marginAnswer

Fixed costsAnswer

Net income before taxesAnswer

Income taxes (36%)Answer

Net income after taxesAnswer

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