Financial and Managerial Accounting
Financial and Managerial Accounting
7th Edition
ISBN: 9781259726705
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 18, Problem 27E
To determine

Contribution Margin Income statement:

Contribution margin income statement shows the sales revenue, deduction of product and period cost from the sales revenue and then identification of contribution margin. It shows the net income while deduct the fixed income from the contribution margin.

To identify: Missing amounts.

Expert Solution & Answer
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Explanation of Solution

Company A

a

Given,
Sales are $208,000.
Selling price per unit is $65.

Formula to calculate number of units sold by Company A,

    Numberofunitssold= Totalsales Sellingpriceperunit

Substitute $208,000 for sales and $65 for selling price per unit.

    Numberofunitssold= $208,000 $65 =3,200units

Hence, value of a is 3,200.

b

Given,
Variable cost is $150,400.

Calculated values (from part a),
Number of units sold are 3,200.

Formula to calculate per unit variable cost,

    Perunitvariableunit= TotalVariable cost Number of units sold

Substitute $150,400 for variable cost and 3,200 for number of units sold.

    Perunitvariableunit= $150,400 3,200 =$47

Hence, value of b is $47.

c

Given,
Variable cost is $150,400.
Sales are $208,000.

Formula to calculate contribution margin,

    Contributionmargin=SalesVariablecost

Substitute $208,000 for sales and $150,400 for variable cost.

    Contributionmargin=$208,000$150,400 =$57,600

Hence, value of c is $57,600.

d

Calculated values,
Number of units sold are 3,200 (from part a).
Contribution margin is $57,600 (from part c).

Formula to calculate per unit contribution margin,

    Perunitcontributionmargin= Totalcontribution margin Number of units sold

Substitute $57,600 for total contribution margin and 3,200 for number of units sold.

    Perunitcontribution margin= $57,600 3,200 =$18

Hence, value of d is $18.

e

Calculated values,
Contribution margin is $57,600 (from part c).

Given,
Net income is $46,400.
Formula to calculate fixed cost,

    Fixedcost=ContributionmarginNetincome

Substitute $57,600 for contribution margin and $46,400 for net income.

    Fixedcost=$57,600$46,400 =$11,200

Hence, value of e is $11,200.

f

Calculated values,
Number of units sold are 3,200 (from part a).
Fixed cost is $11,200(from part e).

Formula to calculate per unit fixed cost,

    Perunitfixedunit= Totalfixed cost Number of units sold

Substitute $11,200 for fixed cost and 3,200 for number of units sold.

    Perunitfixedunit= $11,200 3,200 =$3.5

Hence, value of f is $3.5.

g

Calculated values,
Number of units sold are 3,200 (from part a).

Given,
Net income is $46,400.

Formula to calculate per unit income,

    Perunitincome= Netincome Number of units sold

Substitute $46,400 for net income and 3,200 for number of units sold.

    Perunitincome= $46,400 3,200 =$14.5

Hence, value of g is $14.5.

Company B

h

Given,
Variable cost is $39,500.
Contribution margin is $43,450.

Formula to calculate sales,

    Sales=Variablecost+Contributionmargin

Substitute $43,450 for contribution margin and $39,500 for variable cost.

    Sales=$39,500+$43,450 =$82,950

Hence, value of h is $82,950.

i

Given,
Number of units sold are 1,975.

Calculated values (from part h),
Sales are $82,950.

Formula to calculate selling price per unit,

    Sellingpriceperunit= Totalsales Number of units sold

Substitute $82,950 for total sales and 1,975 for number of units sold.

    Sellingpriceperunit= $82,950 1,975 =$42

Hence, value of i is $42.

j

Given,
Variable cost is $39,500.
Number of units sold are 1,975.

Formula to calculate per unit variable cost,

    Perunitvariableunit= TotalVariable cost Number of units sold

Substitute $39,500 for variable cost and 1,975 for number of units sold.

    Perunitvariableunit= $39,500 1,975 =$20

Hence, value of j is $20.

k

Given,
Number of units sold are 1,975.
Contribution margin is $43,450.

Formula to calculate per unit contribution margin,

    Perunitcontributionmargin= Totalcontribution margin Number of units sold

Substitute $43,450 for total contribution margin and 1,975 for number of units sold.

    Perunitcontribution margin= $43,450 1,975 =$22

Hence, value of k is $22.

l

Given,
Number of units sold are 1,975.
Fixed cost is $19,750.

Formula to calculate per unit fixed cost,

    Perunitfixedunit= Totalfixed cost Number of units sold

Substitute $19,750 for total fixed cost and 1,975 for number of units sold.

    Perunitfixedunit= $19,750 1,975 =$10

Hence, value of l is $10.

m

Given,
Contribution margin is $43,450.
Fixed cost is $19,750.

Formula to calculate net income,

    Netincome=ContributionmarginFixedcost

Substitute $43,450 for contribution margin and $19,750 for fixed cost.

    Netincome=$43,450$19,750 =$23,700

Hence, value of m is $23,700.

n

Given,
Number of units sold are 1,975.

Calculated values,
Net income is $23,700 (from part m).

Formula to calculate per unit income,

    Perunitincome= Netincome Number of units sold

Substitute $23,700 for net income and 1,975 for number of units sold.

    Perunitincome= $23,700 1,975 =$12

Hence, value of n is $12.

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Chapter 18 Solutions

Financial and Managerial Accounting

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