Answer:
Blanchard Company's Predicted Income Statement:
Sales (39,300 x $193) - $7,584,900
VC (39,300 x $133) - ($5,226,900)
Contribution - $2,358,000
FC - ($623,000)
Pre-Tax Income $1,735,000
Income Tax 30% ($520,500)
After Tax Income $1,214,500
Explanation:
a) The contribution is the product of sales revenue less variable cost. The contribution per unit is equal to sales price less variable cost per unit, multiplied by quantity. Predicted quantity is 39,300 and contribution per unit is $60 ($193 - $133). This gives a total contribution of $2,358,000 (39,300 x $60).
b) The Pre-Tax Income is contribution less Fixed Cost. This gives us $1,735,000 ($2,358,000 - $623,000).
c) The After-Tax Income is obtained after applying 30% tax rate on the Pre-Tax Income of $1,735,000. This gives us $1,214,500.
