Wilson Co Is Preparing Next Period's Forecasts

question 148

Essay

Wilson Co. is preparing next period's forecasts. Total fixed costs are expected to be $300,000 and the contribution margin ratio is expected to be 30%. The applicable income tax rate is 25%.
(a) Calculate the company's break-even point in dollar sales.
(b) If sales are $1,800,000 above the break-even point, what will income be (i) pretax income and (ii) after-tax income?

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Definitions:

Financial Statements

Reports that provide an overview of a company's financial condition, including balance sheet, income statement, and cash flow statement.

Common-Size Form

A financial statement analysis tool that expresses each item in a financial statement as a percentage of a base item, facilitating comparison across different periods or companies.

Dun & Bradstreet

A leading global business analytics company that provides commercial data, analytics, and insights for businesses.

Peer Group

A set of companies or individuals used as a point of reference for performance comparison or benchmarking.