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Business Accounting Managerial Accounting

Gross Margin: Gross margin is derived when cost of goods sold subtracted from sales revenue. To determine: Gross margin Solution: Gross Margin = $6000 Traditional format income statement Particulars Amount Amount Sales $12,000 Less: Cost of goods sold $6,000 Gross margin $6,000 Less: Selling and administration expenses Selling $3,400 Administration $1,900 $5,300 Net operating income $700 Contribution income format statement Particulars Amount Amount Sales $12,000 Less: Variable expenses Cost of goods sold $6,000 Variable Selling $900 Variable administration $400 $7,300 Contribution margin $4,700 Less: Fixed expenses Fixed selling $2,500 Fixed administration $1,500 $4,000 Net operating income $700 No, gross margin has not changed, it appears as same in the Exhibit 1-7, because variable selling expense increase not affect the gross margin, only cost of goods increase could make changes in gross margin. Formula: T r a d i t i o n a l f o r m a t i n c o m e s t a t e m e n t = S a l e s − c o s t o f g o o d s s o l d = G r o s s m a r g i n . G r o s s m a r g i n − s e l l i n g e x p e n s e − a d m i n i s t r a t i o n e x p e n s e = N e t o p e r a t i n g i n c o m e . C o n t r i b u t i o n f o r i n c o m e s t a t e m e n t = S a l e s – c o s t o f g o o d s s o l d – v a r i a b l e s e l l i n g e x p e n s e s – v a r i a b l e a d m i n i s t r a t i o n e x p e n s e s = C o n t r i b u t i o n m a r g i n − f i x e d s e l l i n g e x p e n s e – f i x e d a d m i n i s t r a t i o n e x p e n s e s = N e t o p e r a t i n g i n c o m e . Explanations: Gross margin = $6000. Gross margin could derive after deducting cost of goods sold from sales revenue; cost of goods sold is a direct expense for manufacturing the sold goods by the company. Only traditional income format statement has gross margin because it wouldn’t include variable as well as fixed expenses. Contribution for income statement not having gross margin, it has only contribution margin, it derived after deducting cost of goods sold and other variable expenses from the sales revenue. Conclusion: Above explanations stated that the gross margin derived only in traditional format income statement.

Gross Margin: Gross margin is derived when cost of goods sold subtracted from sales revenue. To determine: Gross margin Solution: Gross Margin = $6000 Traditional format income statement Particulars Amount Amount Sales $12,000 Less: Cost of goods sold $6,000 Gross margin $6,000 Less: Selling and administration expenses Selling $3,400 Administration $1,900 $5,300 Net operating income $700 Contribution income format statement Particulars Amount Amount Sales $12,000 Less: Variable expenses Cost of goods sold $6,000 Variable Selling $900 Variable administration $400 $7,300 Contribution margin $4,700 Less: Fixed expenses Fixed selling $2,500 Fixed administration $1,500 $4,000 Net operating income $700 No, gross margin has not changed, it appears as same in the Exhibit 1-7, because variable selling expense increase not affect the gross margin, only cost of goods increase could make changes in gross margin. Formula: T r a d i t i o n a l f o r m a t i n c o m e s t a t e m e n t = S a l e s − c o s t o f g o o d s s o l d = G r o s s m a r g i n . G r o s s m a r g i n − s e l l i n g e x p e n s e − a d m i n i s t r a t i o n e x p e n s e = N e t o p e r a t i n g i n c o m e . C o n t r i b u t i o n f o r i n c o m e s t a t e m e n t = S a l e s – c o s t o f g o o d s s o l d – v a r i a b l e s e l l i n g e x p e n s e s – v a r i a b l e a d m i n i s t r a t i o n e x p e n s e s = C o n t r i b u t i o n m a r g i n − f i x e d s e l l i n g e x p e n s e – f i x e d a d m i n i s t r a t i o n e x p e n s e s = N e t o p e r a t i n g i n c o m e . Explanations: Gross margin = $6000. Gross margin could derive after deducting cost of goods sold from sales revenue; cost of goods sold is a direct expense for manufacturing the sold goods by the company. Only traditional income format statement has gross margin because it wouldn’t include variable as well as fixed expenses. Contribution for income statement not having gross margin, it has only contribution margin, it derived after deducting cost of goods sold and other variable expenses from the sales revenue. Conclusion: Above explanations stated that the gross margin derived only in traditional format income statement.

Managerial Accounting

Managerial Accounting

17th Edition

ISBN: 9781260247787

Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer

Publisher: RENT MCG

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Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. …

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Ch. 1 - Prob. 1Q Ch. 1 - Define the following: (a) direct materials, (b)...Ch. 1 - Explain the difference between a product cost and...Ch. 1 - Distinguish between (a) a variable cost, (b) a...Ch. 1 - Prob. 5Q Ch. 1 - Define the following terms: (a) cost behavior and...Ch. 1 - What is meant by an activity base when dealing...Ch. 1 - Prob. 8Q Ch. 1 - Distinguish between discretionary fixed costs and...Ch. 1 - Does the concept of the relevant range apply to...

Ch. 1 - What is the difference between a traditional...Ch. 1 - Prob. 12Q Ch. 1 - Prob. 13Q Ch. 1 - Prob. 14Q Ch. 1 - Prob. 1AE Ch. 1 - Prob. 2AE Ch. 1 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L012, L013, L014, L015, L016 Martinez Company’s...Ch. 1 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6 Martinez...Ch. 1 - L01–1, L01–2, L01–3, L01–4, L01–5, L01–6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-1, L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - L01-2, L01-3, L01-4, L01-5, L01-6 Martinez...Ch. 1 - EXERCISE 1—1 Identifying Direct and Indirect Costs...Ch. 1 - EXERCISE 1-2 Classifying Manufacturing Costs LO1-2...Ch. 1 - EXERCISE 1-3 Classifying Costs as Product or...Ch. 1 - EXERCISE 14 Fixed and Variable Cost Behavior LO14...Ch. 1 - Prob. 5E Ch. 1 - EXERCISE 1—6 Traditional and Contribution Format...Ch. 1 - Prob. 7E Ch. 1 - EXERCISE 18 Product Costs and Period Costs;...Ch. 1 - Prob. 9E Ch. 1 - Prob. 10E Ch. 1 - EXERCISE 1—11 Cost Behavior; Contribution Format...Ch. 1 - EXERCISE 1-12 Product and Period Cost Flows LO1–3...Ch. 1 - Prob. 13E Ch. 1 - EXERCISE 1-14 Cost Classification 1O1–2, LO1–3,...Ch. 1 - Prob. 15E Ch. 1 - EXERCISE 1–16 Cost Classifications for Decision...Ch. 1 - EXERCISE 1-17 Classifying Variable and Fixed Costs...Ch. 1 - PROBLEM 1-18 Direct and Indirect Costs; variable...Ch. 1 - PROBLEM 1-19 Traditional and Contribution Format...Ch. 1 - PROBLEM 120 Variable and Fixed Costs; Subtleties...Ch. 1 - Prob. 21P Ch. 1 - Prob. 22P Ch. 1 - PROBLEM 123 Cost Classification LO11, LO13, LO14...Ch. 1 - PROBLEM 1-24 Different Cost Classifications for...Ch. 1 - Prob. 25P Ch. 1 - CASE 1-26 Cost Classification and Cost Behavior...Ch. 1 - Prob. 27C

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