Question

Letter 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 53,000 units of each product. Sales and costs for each product follow.

	Product T				Product O
Sales		$	863,900			$	863,900
Variable costs			604,730				86,390
Contribution margin			259,170				777,510
Fixed costs			116,170				634,510
Profit before taxes			143,000				143,000
Income taxes (40% rate)			57,200				57,200
Net profit		$	85,800			$	85,800

1.

value:
10.00 points

Required information

Required:
1.	Compute the break-even point in dollar sales for each product. (Round your contribution margin ratio to 1 decimal place, other intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Omit the "$" sign in your response.)

  

Product T	$
Product O	$

References

WorksheetLearning Objective: 22-A1 Compute the contribution margin and describe what it reveals about a company’s cost structure.Learning Objective: 22-P4 Compute the break-even point for a LP22 multiproduct company

Difficulty: 3 HardLearning Objective: 22-C2 Describe several applications of costvolume- profit analysis.

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2.

value:
10.00 points

Required information

2.

Assume that the company expects sales of each product to decline to 36,000 units next year with no change in unit sales 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 40% tax rate). Also, assume that any loss before taxes yields a 40% tax savings. (Round your contribution margin ratio to 1 decimal place, other intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Input all amounts as positive values except losses and tax savings on losses, which should be indicated by a minus sign. Omit the "$" sign in your response.)

   

LETTER CO. Forecasted Contribution Margin Income Statement
	Product T	Product O
(Click to select)Sales commissionsSalesFactory maintenanceTaxes on factoryOffice equipment lease	$	$
(Click to select)Sales comissionsVariable costsTaxes on factoryRent on factoryOffice equipment lease
(Click to select)Gross profitContribution margin
(Click to select)Factory maintenanceSales comissionsRent on factoryFixed costsOffice equipment lease
(Click to select)Sales comissionsIncome before taxesTaxes on factoryRent on factoryOffice equipment lease
(Click to select)Taxes on factoryOffice equipment leaseSales comissionsIncome taxesRent on factory
Net income/loss	$	$

Answer 1