Question

ABC Co. incurred a unit cost of $ 200 on products sold during year ended 12/31/03.

Net Sales for the year totaled $ 6,000,000 and the Gross Profit Per Unit was $ 400. Operating Income was 50% of Gross Profit, and Income Tax Expense totaled $ 600,000 for the year. The After-Tax rate was 60%.

Based upon the aforementioned information, provide the Income Statement for ABC Co. for year ended 12/31/03.

Answer 1

Cost per unit = $200
Gross Profit per unit = $400

Gross Profit per unit = Selling Price per unit - Cost per unit
$400 = Selling Price per unit - $200
Selling Price per unit = $600

Net Sales = Selling Price per unit * Number of units sold
$6,000,000 = $600 * Number of units sold
Number of units sold = 10,000

Cost of Goods Sold = Number of units sold * Cost per unit
Cost of Goods Sold = 10,000 * $200
Cost of Goods Sold = $2,000,000

Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = $6,000,000 - $2,000,000
Gross Profit = $4,000,000

Operating Income = 50% * Gross Profit
Operating Income = 50% * $4,000,000
Operating Income = $2,000,000

Income Tax Expense = Income before Tax * Tax Rate
$600,000 = Income before Tax * 60%
Income before Tax = $1,000,000

Income before Tax = Operating Income - Interest Expense
$1,000,000 = $2,000,000 - Interest Expense
Interest Expense = $1,000,000

Operating Income = Gross Profit - Operating Expenses
$2,000,000 = $4,000,000 - Operating Expenses
Operating Expenses = $2,000,000

Net Income = Income before Tax - Income Tax Expense
Net Income = $1,000,000 - $600,000
Net Income = $400,000