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p Multiple Product Planning with Taxes In the year 2008, Wiggins Processing Company had the following contribution income statement: WIGGINS PROCESSING COMPANY Contribution Income Statement

p

Multiple Product Planning with Taxes In the year 2008, Wiggins Processing Company had the following contribution income statement:

WIGGINS PROCESSING COMPANY Contribution Income Statement For the Year 2008

Sales

$1,000,000

Variable costs

Cost of goods sold

$460,000

Selling and administrative

200,000

(660,000)

Contribution margin

340,000

Fixed Costs

Factory overhead

192,000

Selling and administrative

80,000

(272,000)

Before-tax profit

68,000

Income taxes (38%)

(25,840)

After-tax profit

$42,160

HINT: Round the contribution margin ratio to two decimal places for your calculations below.

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

$Answer

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

$Answer

(c) What is the break-even point in sales dollars if management makes a decision that increases fixed costs by $34,000?

Answer

(d) With the current cost structure, including fixed costs of $272,000, what dollar sales volume is required to provide an after-tax net income of $160,000?

Do not round until your final answer. Round your answer to the nearest dollar.

$Answer

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

Round your answers to the nearest dollar. Use rounded answers for subsequent calculations. Do not use negative signs with any of your answers.

WIGGINS PROCESSING COMPANY Income Statement For the Year 2008

Sales

$Answer

Variable costs (66% of sales)

Answer

Contribution margin

Answer

Fixed costs

Answer

Net income before taxes

Answer

Income taxes (38%)

Answer

Net income after taxes

$Answer

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