Question
The Contribution income statement for Deines Corporation presented below shows the operating results for the fiscal year just ended. Deines had sales of 1,800 tons
The Contribution income statement for Deines Corporation presented below shows the operating results for the fiscal year just ended. Deines had sales of 1,800 tons of product during that year. The manufacturing capacity of Deines facilities is 3,000 tons of product.
Revenues $900,00
Less Variable Cost: Manufacturing Cost $315,000 Nonmanufacturing Cost $180,000 Total Variable Cost $495,00 Contribution Margin $405,00
Less Fixed Cost Manufacturing Cost $90,000 Nonmanufacturing $157,500 Total Fixed Cost $247,50 Operating Income $157,50
a) If the sales volume is estimated to be 2,100 tons for next year, and if the selling price and cost-behavior patterns remain the same next year, how much net income does Deines expect to earn next year?
b (Assume Deines estimates the selling price per ton will decline 10% next year, variable cost will increase by $40 per ton, and total fixed costs will not change. Compute how many tons must be sold next year to earn net income of $94,500
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