Friday, 13 February 2015

Blanchard Company manufactures a single product that sells for $184 per unit and whose total variable costs are $138 per unit. The company’s annual fixed costs are $632,000. The sales manager predicts that annual sales of the company’s product will soon reach 40,200 units and its price will increase to $202 per unit. According to the production manager, the variable costs are expected to increase to $142 per unit but fixed costs will remain $632,000. The income tax rate is 30%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?

Blanchard Company manufactures a single product that sells for $184 per unit and whose total variable costs are $138 per unit. The company’s annual fixed costs are $632,000. The sales manager predicts that annual sales of the company’s product will soon reach 40,200 units and its price will increase to $202 per unit. According to the production manager, the variable costs are expected to increase to $142 per unit but fixed costs will remain $632,000. The income tax rate is 30%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?

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