D. L Marx and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Barnes , the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for next year's marketing campaign, the company's controller has prepared and presented Mr. Barnes with the following data for the current year, 2017 :

Total variable cost per bowl: $12.60Total fixed costs: $184,800Selling price: $28.00

Expected sales, 21500 units: $602,000Income tax rate: %40What is the projected net income for 2017?

Question

Johan Pearson

Business

23 February, 11:23

D. L Marx and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Barnes , the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for next year's marketing campaign, the company's controller has prepared and presented Mr. Barnes with the following data for the current year, 2017 :

Total variable cost per bowl: $12.60Total fixed costs: $184,800Selling price: $28.00

Expected sales, 21500 units: $602,000Income tax rate: %40What is the projected net income for 2017?

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Answers (1)

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Kaydence Combs · Answer 1

The projected net income for 2017 is $87,780

Explanation:

Total sales for 2017 = $28.00 x 21,500 = $602,000

Total variable cost per bowl is $12.60

Total variable cost for 2017 = $12.60 x 21,500 = $270,900

Income before tax = Total sales - Total variable cost - Total fixed costs = $602,000 - $270,900 - $184,800 = $146,300

Tax = Income before tax x Income tax rate = $146,300 x 40% = $58,520

The projected net income for 2017 = Income before tax - Tax = $146,300 - $58,520 = $87,780