LirianoAU05a02.docx

# Less variable cost 400000 contribution margin 600000

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Less Variable Cost…………………………………………… 400,000 Contribution margin………………………………………… 600,000 Fixed cost…………………………………………………… 450,000 Net operating income……………………………………… .... 150,000 4. Compute the sales level required in both dollars and units to earn \$140,000 of after-tax income in 2014 with the machine installed and no change in the unit sales price. Assume that the income tax rate is 30%. Requires Sales Level

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5 LirianoAU05a02 = FC + TP / CM ratio = 450,000 - 140,000 / .30 = \$ 1,083,333 or 1,083,333 / \$50 = 21,667 units. 5. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume an income tax rate of 30%. Forecasted contribution margin income statement Sales ………………………………………………………….. \$1,083,350 Less Variable Cost ……………..…………………...……… \$433,340
6 LirianoAU05a02 Contribution Margin………………………………………… \$650,010 Less Fixed Cost………………………………………………. \$450,000 Net Operating Income………………………………………. \$200,010 References Capella University (Ed.). (2014). BUS4061: Managerial accounting principles [Custom text]. Boston, MA: McGraw-Hill Create. ISBN: 9781308231648.
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• Fall '14
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