Reference no: EM132528824

Question - Kamili Company reported the following income statement items for Year 1. Sales $100,000 Net income (after income taxes) 4,800 Operating income 15,000 Gross profit 45,000

Note: Gross Profit = Sales - Cost of Goods Sold Operating Income = Gross Profit - Selling and Administrative Expense Net Income = Operating Income - Interest Expense - Income Tax Expense

Additional data available to the management of Kamili Company indicate that cost of goods sold includes $25,000 in fixed costs (plus some amount of variable cost). In addition, selling and administrative expense includes $20,000 in fixed costs (plus some amount of variable cost). Kamili's income tax rate is 40%.

Assume that the sales amount were to grow to $120,000. Also assume that this sales increase can be accomplished with no increase in total assets and thus no change in total financing. Estimate the following quantities under this assumption of sales of $120,000.

i. Contribution Margin

ii. Operating Income

iii. Interest Expense

iv. Income Tax Expense

v. Net Income