Assume that the company expects sales of each product to decline to 25,000 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 savings. (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 Product O Total
Units $ Per unit Total $ Per unit Total
Sales 25,000 $17.80 $445,000 $17.80 $445,000 $890,000
Variable cost 25,000 $12.46 311,500 $5.98 149,500 461,000
Contribution margin 25,000 $5.34 133,500 $5.98 149,500 283,000
Fixed costs 0
Income before taxes 133,500 133,500
Income taxes (tax benefit)
Net income (loss)
3. Assume that the company expects sales of each product to increase to 56,000 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.) Forcasted Contribution Margin Income Statement (layed out like one abouve but I couldnt get them both to paste)
HENNA CO. Forecasted Contribution Margin Income Statement
Product T Product O Total
Units $ Per unit Total $ Per unit Total
Sales 25,000 $17.80 $445,000 $17.80 $445,000 $890,000
Variable cost 25,000 $12.46 311,500 $5.98 149,500 461,000
Contribution margin 25,000 $5.34 133,500 $5.98 149,500 283,000
Fixed costs 0
Income before taxes 133,500 133,500
Income taxes (tax benefit)
Net income (loss)
3. Assume that the company expects sales of each product to increase to 56,000 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.) Forcasted Contribution Margin Income Statement (layed out like one abouve but I couldnt get them both to paste)
1 answer:
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Answer:
c) 10% more peanut butter on the shelves
Explanation:
Since peanut butter has a negative income elasticity of demand (-0.5) with a decrease in income, there should be an increase in the demand. This is usually true for cheaper goods or goods with low added value. The change in demand (D) is represented as follows:
As a result, you should stock 10% more peanut butter on the shelves.
The answer is c).