Answer:
The Canton Corporation
a. The After-tax income for 2014 is:
= $94,719.
b. The after-tax income increased by 30.93% as a result of a 10% increase in the sale price.
c. The after-tax income for 2015 is:
= $51,530.
Explanation:
a) Data and Calculations:
CANTON CORPORATION
Income Statement for 2013
Sales $340,100 (17,900 units at $19.00)
Cost of goods sold 205,850 (17,900 units at $11.50)
Gross profit $134,250
Selling and administrative expense 20,406
Depreciation 10,500
Operating profit $103,344
Taxes (30%) 31,003
After-tax income $72,341
CANTON CORPORATION
Income Statement for 2014
Sales $374,110 (17,900 units at $20.90)
Cost of goods sold 205,850 (17,900 units at $11.50)
Gross profit $168,260
Selling and administrative expense 22,446.60 (6% of sales)
Depreciation 10,500
Operating profit $135,313.40
Taxes (30%) 40,594.02
After-tax income $94,719.38
Increase in after-tax income:
After-tax income in 2014 = $94,719
After-tax income in 2013 = $72,341
Increase in after-tax income $22,378
Percentage increase = $22,378/$72,341 * 100 = 30.93%
Income Statement for 2015
Sales $317,993.50 (17,900 units at $17.77)
Cost of goods sold 214,800.00 (17,900 units at $12.00)
Gross profit $103,193.50
Selling and administrative expense 19,079.61 (6% of sales)
Depreciation 10,500
Operating profit $73,613.89
Taxes (30%) 22,084.17
After-tax income $51,529.72
After-tax income rounded to the nearest whole dollar = $51,530
