Net sales Less: Less: Less: Less: Net income XY CORPORATE SUMMARY REPORT CONTRIBUTION INCOME STATEMENTS For the Year Ending December 31, 20XX Variable product cost Variable SG&A Total variable cost Controllable contribution margin Controllable fixed costs Controllable contribution margin Uncontrollable fixed costs Segment margin General corporate costs Company Total 1,400,000 450,000 225,000 675,000 725,000 250,000 Which division has the higher contribution margin? >>>> Which division has the higher contribution margin ratio? >>>> Which margin is most useful in evaluating segment viability? 540,000 225,000 315,000 250,000 65,000 Which margin is most useful in evaluating segment management? >>>> Division X 600,000 250,000 25,000 275,000 325,000 85,000 240,000 75,000 165,000 Division Y 800,000 200,000 200,000 400,000 400,000 100,000 300,000 150,000 150,000 Y X Segment Controllable

Net sales Less: Less: Less: Less: Net income XY CORPORATE SUMMARY REPORT CONTRIBUTION INCOME STATEMENTS For the Year Ending December 31, 20XX Variable product cost Variable SG&A Total variable cost Controllable contribution margin Controllable fixed costs Controllable contribution margin Uncontrollable fixed costs Segment margin General corporate costs Company Total 1,400,000 450,000 225,000 675,000 725,000 250,000 Which division has the higher contribution margin? >>>> Which division has the higher contribution margin ratio? >>>> Which margin is most useful in evaluating segment viability? 540,000 225,000 315,000 250,000 65,000 Which margin is most useful in evaluating segment management? >>>> Division X 600,000 250,000 25,000 275,000 325,000 85,000 240,000 75,000 165,000 Division Y 800,000 200,000 200,000 400,000 400,000 100,000 300,000 150,000 150,000 Y X Segment Controllable

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 87PSB

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Remember: Gross profit = SP- CP Activity 1.2 enti Complete the following table: Table 1.2: Finding the cost price, the gross profit or the selling price No Cast price Gross prafit Selling price 1.2.1 R5 600 R8 700 1.2.2 R3 400 30% 1.2.3 R6 800 R12 700 1.2.4 R17 500 R35 000 The owner of an enterprise has to calculate both the gross and the net profit. A business has certain operating expenses thai must be deducied from the gross profit to get the net profit. Examples of operating expenses are: • Salaries Wages • Rent paid/rent expense • Advertisements • Stationery. The cost of advertising the business is one example of an operating expense. Gross profit minaş operating expenses equals net profit."
The dollar amount of sales needed to achieve a target operating income is computed by dividingbtarget operating income by the contribution margin ratio True False
True or False Questions. 1. A contribution approach income statement can usually be easily prepared from the information contained in a corporation's published income statement. True False 2. The profit in cost-volume-profit equations is the same as the net operating income on a contribution income statement. True False 3. On a cost-volume-profit graph, the revenue line will be shown above the total expense line for any activity level above the break-even point. True False 4. On a CVP graph for a profitable company, the line representing total expenses is steeper than the line representing total revenue. True False
When using a segmented income statement, what is the best number to look at to determine the effect of the elimination of a segment on the net operating income of the company as a whole? O Multiple Choice the product line's sales dollars the product line's contribution margin the product line's segment margin the product line's segment margin minus an allocated portion of common fixed expenses
Match each of the following descriptions with the appropriate term. Clear All Plots only the difference between total sales and total costs Indicates the possible decrease in sales that may occur before operating loss results Graphically shows costs, sales, and operating profit or loss at various levels of units sold The relative distribution of sales among products sold by a company Contribution margin divided by operating income Profit-volume chart Cost-volume-profit chart Operating leverage Margin of safety Sales mix
1. To compute the breakeven point using the contribution margin, we get the ratio of a. Total fixed expenses and Total contribution margin b. Total variable expenses and Total Contribution margin c. Total fixed expenses and Contribution margin per unit d. Total variable expenses and Contribution margin per unit 2. A mathematical expression that describes a breakeven point of a company is a. Sales Revenue = Variable expenses + Fixed expenses b. Sales Revenue = Variable expenses - Fixed expenses c. Sales Revenue < Variable expenses + Fixed expenses d. Sales Revenue > Variable expenses - Fixed expenses 3. The Cost-Volume-Profit equation is given by a. Sales Revenue = Profits + Contribution margin ratio + Fixed expenses b. Sales Revenue = Profits + Contribution margin + Fixed expenses c. Sales Revenue = Profits+ Variable expenses + Fixed expenses d. Sales Revenue = Profits -Variable expenses…
1. A profit-volume graph differs from a cost-volume-profits graph in that a profit-volume graph displays onlya. costs associated with units produced.b. operating income associated with expected sales.c. revenues and costs associated with sales volume.d. revenues expected at targeted sales levels.e. All of these are correct. 2. Fixed expenses that cannot be directly traced to individual segments are calleda. cost structure.b. direct fixed expenses.c. operating leverage.d. common fixed expenses.e. indifference point. 3. If sales remain the same and the margin of safety increases, which of the following is true?a. The break-even point has decreased.b. The common fixed costs have increased.c. The break-even point has remained constant.d. Variable costs have increased. 4. Match the type of income statement to the costs it includes.a. Variable costing income statementb. Absorption costing income statementc. Both types of income statements 1. Direct materials for units sold2.…
Net Income Planning Selected operating data for Oakbrook Company in four independent situations are shown below. Fill in the blanks for each independent situation. Sales Variable expense Fixed expense Net income (loss) before tax Units sold Unit contribution margin Contribution margin ratio $ $ A $350,000 0 a. 0 b. $25,000 30,000 $5.20 $ B 0 C. $ $ $111,000 $62,000 $15,000 0 d. $7.00 C 0 e. 0 f. $ $53,200 $28,800 0.4 D $520,000 0 g. $178,000 $(22,000) 0 h.
What can the weighted average contribution margin ratio be used for? Multiple Choice To solve for a measure, at any level of sales volume, of the sensitivity of operating profit to changes in volume. Breakeven and profit planning for sales volume expressed in dollars (Y) rather than units (Q). To calculate an average per-unit contribution margin based on an assumed sales mix. To figure out the relative proportion in which a company’s products (or services) are sold. To determine the extent of fixed costs in an organization’s cost structure.
For CVP analysis calculations, which of the following statements is correct? A. In target profit calculations, sales revenue is less than total costs. B. CVP analysis relies on our knowledge of cost function to express relationships among costs, sales volume, and profit. OC. A company's sales mix is ultimately determined by the management of a company. D. The Break-even point is the point at which operating income is greater than $0. O E. If sales volume is expected to be higher than the indifference point, management should choose the cost structure with the higher fixed costs.
Match each of the following descriptions with the appropriate term. Clear All Plots only the difference between total sales and total costs Indicates the possible decrease in sales that may occur before operating loss results Graphically shows costs, sales, and operating profit or loss at various levels of units sold The relative distribution of sales among products sold by a company Contribution margin divided by operating income Margin of safety Operating leverage Profit-volume chart Sales mix Cost-volume-profit chart mg malt
What can the weighted average contribution margin ratio be used for? To solve for a measure, at any level of sales volume, of the sensitivity of operating profit to changes in volume. Breakeven and profit planning for sales volume expressed in dollars (Y) rather than units (Q). To calculate an average per-unit contribution margin based on an assumed sales mix. To figure out the relative proportion in which a company’s products (or services) are sold. To determine the extent of fixed costs in an organization’s cost structure.