Skipmar Company produces a molded briefcase that is distributed to luggage stores.The following operating data for the current year has been accumulated for planning purposes. Skipmar can produce 1.5 million cases a year.The projected net income for the coming year is expected to be $1.8 million.Skipmar is subject to a 40% income tax rate.
During the planning sessions, Skipmar's managers have been reviewing costs and ?expenses.They estimate that the company's variable cost of goods sold will increase 15% in the coming year and that fixed administrative expenses will increase by $150,000.All other costs and expenses are expected to remain the same.
Required:
a.What amount of sales revenue will Skipmar need to achieve in the coming year to earn the projected net income of $1.8 million?
b.What price would Skipmar need to charge for the briefcase in the coming year to maintain the current year's contribution margin ratio?

Question

Skipmar Company produces a molded briefcase that is distributed to luggage stores.The following operating data for the current year has been accumulated for planning purposes.  Skipmar can produce 1.5 million cases a year.The projected net income for the coming year is expected to be $1.8 million.Skipmar is subject to a 40% income tax rate.
During the planning sessions, Skipmar's managers have been reviewing costs and ?expenses.They estimate that the company's variable cost of goods sold will increase 15% in the coming year and that fixed administrative expenses will increase by $150,000.All other costs and expenses are expected to remain the same.
Required: 
a.What amount of sales revenue will Skipmar need to achieve in the coming year to earn the projected net income of $1.8 million?
b.What price would Skipmar need to charge for the briefcase in the coming year to maintain the current year's contribution margin ratio?

Quizplus · Accepted Answer

The Answer of Skipmar Company produces a molded briefcase that is distributed to luggage stores.The following operating data for the current year has been accumulated for planning purposes.  Skipmar can produce 1.5 million cases a year.The projected net income for the coming year is expected to be $1.8 million.Skipmar is subject to a 40% income tax rate.
During the planning sessions, Skipmar's managers have been reviewing costs and ?expenses.They estimate that the company's variable cost of goods sold will increase 15% in the coming year and that fixed administrative expenses will increase by $150,000.All other costs and expenses are expected to remain the same.
Required: 
a.What amount of sales revenue will Skipmar need to achieve in the coming year to earn the projected net income of $1.8 million?
b.What price would Skipmar need to charge for the briefcase in the coming year to maintain the current year's contribution margin ratio?

Skipmar Company Produces a Molded Briefcase That Is Distributed to Luggage