Question
Product Planning with Taxes Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement: CLIFF CONSULTING Contribution Income
Product Planning with Taxes Assume that last year, Cliff Consulting, a firm in Berkeley, CA, had the following contribution income statement:
CLIFF CONSULTING Contribution Income Statement For the Year Ended September 30 | ||
---|---|---|
Sales revenue | $ 1,200,000 | |
Variable costs | ||
Cost of services | $ 480,000 | |
Selling and administrative | 60,000 | 540,000 |
Contribution margin | 660,000 | |
Fixed Costs -selling and administrative | 440,000 | |
Before-tax profit | 220,000 | |
Income taxes (21%) | 46,200 | |
After-tax profit | $ 173,800 |
(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 $80,000?
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 $440,000, what dollar sales revenue is required to provide an after-tax net income of $250,000?
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 not usenegative signs with any of your answers.
CLIFF CONSULTING Income Statement | |
---|---|
Sales | Answer |
Variable costs | Answer |
Contribution margin | Answer |
Fixed costs | Answer |
Net income before taxes | Answer |
Income taxes (21%) | Answer |
Net income after taxes | Answer |
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