Prepare forecasted financial results for next year

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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 46,000 units of each product. Sales and costs for each product follow.


Product T

Product O

Sales

$800,400

$800,400

Variable costs

640,320

160,080

Contribution margin

160,080

640,320

Fixed costs

32,080

512,320

Income before taxes

128,000

128,000

Income taxes (35% rate)

44,800

44,800

Net income

$83,200

$83,200

Assume that the company expects sales of each product to decline to 29,000 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 35% tax rate). Also, assume that any loss before taxes yields a 35% tax savings.

Reference no: EM131816201

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