(Solution) 18) The Canton Corporation Shows The Following Income Statement. The Firm Uses FIFO Inventory Accounting. CANTON CORPORATION Income Statement For... | Snapessays.com


(Solution) 18) The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting. CANTON CORPORATION Income Statement for...


18)The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting.     CANTON CORPORATIONIncome Statement for 2013   Sales $ 238,000    (14,000 units at $17.00)   Cost of goods sold   154,000    (14,000 units at $11.00)       Gross profit $ 84,000       Selling and administrative expense   14,280       Depreciation   12,400           Operating profit $ 57,320       Taxes (30%)   17,196           Aftertax income $ 40,124              a. Assume in 2014 the same 14,000-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $11.00 per unit. Also assume selling and administrative expense will be 6 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 2014. (Do not round intermediate calculations. Round your answer to the nearest whole number.)       Aftertax income $         b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)     Gain in aftertax income  %      c. Now assume that in 2015 the volume remains constant at 14,000 units, but the sales price decreases by 15 percent from its year 2014 level. Also, because of FIFO inventory policy, cost of goods sold reflects the inflationary conditions of the prior year and is $11.50 per unit. Further, assume selling and administrative expense will be 6 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute the aftertax income. (Round the sales price per unit to 2 decimal places but do not round any other intermediate calculations. Round your final answer to the nearest whole dollar amount.)      Aftertax income $

 


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This question was answered on: May 23, 2022

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