Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $84 per unit.

Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $84 per unit. The company’s annual fixed costs are $627,000. The sales manager predicts that annual sales of the company’s product will soon reach 39,700 units and its price will increase to $197 per unit. According to the production manager, the variable costs are expected to increase to $137 per unit but fixed costs will remain at $627,000. The income tax rate is 35%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?
Prepare a forecasted contribution margin income statement.

Explanation: BLANCHARD COMPANY Forecasted Contribution Margin Income Statement   Sales (39,700 × $197)   $ 7,820,900     Variable costs (39,700 × $137)     5,438,900           Contribution margin (39,700 × $60)     2,382,000     Fixed costs     627,000           Income before taxes     1,755,000     Income taxes (35% × $1,755,000)     614,250           Net income   $ 1,140,750