Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 11, Problem 12E
a)
To determine
Reconstruct Company H’s income statement as it serves 400 customers by reducing the sales price to $120 per customers.
b)
To determine
Reconstruct Company C’s income statement as it serves 400 customers by reducing the sales price to $120 per customers.
c)
To determine
The reason why price-cutting strategy increased H Company’s
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Problem 12-21 (Algo) Prepare a contribution margin format income statement; answer what-if questions
LO 12-7, 12-8, 12-9
Shown here is an income statement in the traditional format for a firm with a sales volume of 7,500 units. Cost formulas also are shown:
Revenues
Cost of goods sold ($5,900 + $2.25/unit)
Gross profit
Operating expenses:
Selling ($1,200 + $0.10/unit)
Administrative ($3,500 + $0.20/unit)
Operating income
$34,400
22,775
$ 11,625
1,950
5,000
$ 4,675
Required:
a. Prepare an income statement in the contribution margin format.
b. Calculate the contribution margin per unit and the contribution margin ratio.
c. Calculate the firm's operating income (or loss) if the volume changed from 7,500 units to
1. 11,250 units.
2. 3,750 units.
d. Refer to your answer to part a for total revenues of $34,400. Calculate the firm's operating income (or loss) if unit selling price and
variable expenses per unit do not change and total revenues
1. Increase by $14,500.
2. Decrease by $3,000.
Question 1
Not yet answered
Sales
Variable expense
Fixed expense
Net income (loss) before tax
Units sold
Unit contribution margin
Contribution margin ratio
Net Income Planning
Selected operating data for Oakbrook Company in four independent situations are shown below.
Fill in the blanks for each independent situation.
Save Answers
$
LA
LA
Marked out of 7.00
$
A
$300,000 $
$20,000-
30,000
$5.20
a.
b.
Flag question
B
$91,000
$62,000
$15,000
$7.00
C. $
d.
LA
$
C
$43,200
$28,800
0.4
e.
f. $
D
$260,000
$89,000
$(11,000)
g.
h.
Question 2
Two companies. The North and South sell the same type of product in the same type of market.
Their budgeted profit and loss account for the year ended 31st March, 2018 were as follows:
North
South
Sales
75,000
75,000
Variable cost
60,000
50,000
Fixed Cost
7,500
17, 500
67,500
67,500
Net Profit
7,500
7,500
You are required to:
a. Calculate the break-even sales revenue of each enterprise
b. State with reason which business is likely to earn greater profit in conditions of į. Heavy
demand for the product and ii. Low demand for the product.
c. If North Company increases its capacity by 40% and this increased fixed cost by $2,000
per annum, at what sales revenue will it make the same Net Profit as before?
Chapter 11 Solutions
Survey Of Accounting
Ch. 11 - 1.Define fixed cost and variable cost and give an...Ch. 11 - Prob. 2QCh. 11 - 3.Define the term operating leverage and explain...Ch. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - 6.If volume is increasing, would a company benefit...Ch. 11 - Explain the risk and rewards to a company that...Ch. 11 - 9.Are companies with predominately fixed cost...Ch. 11 - 10.How is the relevant range of activity related...Ch. 11 - Which cost structure has the greater risk?...
Ch. 11 - 14.The president of Bright Corporation tells you...Ch. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - Prob. 17QCh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Exercise 2-4A Determining total variable cost The...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 - Prob. 9ECh. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prepare an income statement using the contribution...Ch. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Problem 2-19A Context-sensitive nature of cost...Ch. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26PCh. 11 - Prob. 27PCh. 11 - Prob. 28PCh. 11 - Prob. 29PCh. 11 - Prob. 1ATCCh. 11 - Prob. 2ATCCh. 11 - Prob. 3ATCCh. 11 - Prob. 4ATCCh. 11 - Prob. 5ATC
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- Assume a company with two divisions (A and B) prepared the following segmented income statement: A B Traceable fixed expenses Sales Variable expenses Contribution margin Segment margin Common fixed expenses Net operating income The dollar sales required for the company to break even is closest to: $ 300,000 $ 209,500 Total $ 509,500 120,000 180,000 140,000 260,000 69,500 249,500 100,000 80,000 180,000 $ 80,000 $ (10,500) 69,500 48,000 $ 21,500arrow_forwardHomework 1 In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information: Sales Variable expenses as a percentage of sales. Traceable fixed expenses Required 1 Required 2A Required 28. Complete this question by entering your answers in the tabs below. Net operating income will East $ 392,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department believes increasing the West Division's monthly advertising by $28,000 will increase that division's sales by 16%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising? increase 52% by $ 299,000arrow_forwardService Emphasis The following analysis of selected data is for each of the two services Rockville Corporation provides. Service G Service H Per-unit data at 10,000 services Sales price Service costs: Variable Fixed Selling and administrative expenses: Variable Fixed $ Revenue Less: Variable cost Contribution margin Labor hours per unit Contribution margin per labor hour $ $36 $ 19 6 G 5 3 In the Rockville's operation, labor capacity is the company's constraining resource. Each unit of G requires 3 hours of labor, and each unit of H requires 1 hours of labor. Assuming that all service can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Rockville might have. Service $23 36 $ 25 X 11 * $ 3 3.67 × $ 15 4 2 1 H 23 19 x 4 x 1 4 × Any unused capacity should be devoted to Service H, which has $2 less contribution margin per labor hour than does Service G. Any unused capacity should be devoted to…arrow_forward
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