Required information Problem 05-5A Break-even analysis, different cost structures, and income calculations LO C2, A1, P4 [The following information applies to the questions displayed below.] 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 46,000 units of each product. Sales and costs for each product follow. Sales Variable costs Contribution margin Fixed costs Income before taxes Income taxes (35% rate) Net income Product T $800,400 640,320 160,080 32,080 128,000 44,800 $ 83,200 Product O $800, 400 160,080 640,320 512,320 128,000 44,800 $ 83,200 Problem 05-5A Part 1 Required: 1. Compute the break-even point in dollar sales for each product. (Enter CM ratio as percentage rounded to 2 decimal places.) Product T Contribution Margin Ratio Choose Numerator: 1 Choose Denominator: = Contribution Margin Ratio Contribution margin ratio / 0 Break-Even Point in Dollars Choose Numerator: 1 Choose Denominator: Break-Even Point in Dollars Break-even point in dollars / 0 Producto Contribution Margin Ratio / Contribution margin ratio 0 Break-Even Point in Dollars / Break-even point in dollars $ 2/ 0 Problem 05-5A Part 2 2. Assume that the company expects sales of each product to decline to 29,000 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 35% tax rate). Also, assume that any loss before taxes yields a 35% tax benefit. (Round "per unit" answers to 2 decimal places. Enter losses and tax benefits, if any, as negative values.) HENNA CO. Forecasted Contribution Margin Income Statement Product T Producto Total Units $ Per unit Total $ Per unit Total $ 0 $ 0 0 0 0 Contribution margin 0 0 0 Net income (loss) Problem 05-5A Part 3 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 35% tax rate). (Round "per unit" answers to 2 decimal places.) HENNA CO. Forecasted Contribution Margin Income Statement Product T Producto Total Units $ Per unit Total $ Per unit Total $ 0 $ 0 $ 0 0 0 0 Contribution margin 0 0 Net income (loss) $ 0
