Wessel Corp. plans to sell 1,000 units in 2005 at an average sale price of $45 each. Cost of goods sold will be 40% of the sale price. Depreciation expense will be $3,000, interest expense $2,500, and other expenses will be $4,000. Wessel's tax rate is 20%. What will Wessel Corp's net income be for 2005?

Question

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Net income calculation: Sales = 1,000 units * $45 = $45,000. Cost of goods sold = 40% of $45,000 = $18,000. Gross profit = $45,000 - $18,000 = $27,000. Total expenses = Depreciation ($3,000) + Interest ($2,500) + Other expenses ($4,000) = $9,500. Earnings before tax = $27,000 - $9,500 = $17,500. Tax = 20% of $17,500 = $3,500. Net income = $17,500 - $3,500 = $14,000.