FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Related questions
Concept explainers
Question
Farr Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of Farr Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report.
The following data have been gathered from the accounting records for the year ended December 31:
Instructions
- Prepare a contribution margin analysis report (using the spreadsheet) for the year ended December 31.
- At a meeting of the board of directors on January 30, the president, after reviewing the contribution margin analysis report, made the following comment:
It looks as if the price increase of $30 had the effect of increasing sales. However, this was a trade-off since sales volume decreased. Also, variable cost of goods sold per unit increased by $15 more than planned. The variable selling and administrative expenses appear out of control. They increased by $7 per unit more than was planned, which is an increase of over 47% more than was planned. Let’s look into these expenses and get them under control! Also, let’s consider increasing the sales price to $275 and continue this favorable trade-off between higher price and lower volume.
Do you agree with the president's comment? Explain.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Aelan Products Company, a small manufacturer, has submitted the items below concerning last year's operations. The president's secretary, trying to be helpful, has alphabetized the list. Administrative salaries $4,800 Advertising expense 2,400 Depreciation—factory building 1,600 Depreciation—factory equipment 3,200 Depreciation—office equipment 360 Direct labour cost 43,800 Raw materials inventory, beginning 4,200 Raw materials inventory, ending 6,400 Finished goods inventory, beginning 93,960 Finished goods inventory, ending 88,820 General liability insurance expense 480 Indirect labour cost 23,600 Insurance on factory 2,800 Purchases of raw materials 29,200 Repairs and maintenance of factory 1,800 Sales salaries 4,000 Taxes on factory 900 Travel and entertainment expense 2,820 Work in process inventory, beginning 3,340 Work in process inventory, ending 2,220…arrow_forwardAll products at Luke Corp. are allocated a portion of corporate overhead costs, which is computed as a percent of product revenue. The percentage rate is based on the level of corporate costs as a percentage of revenues. Data on corporate costs and revenues for the past two years were stated as: Corporate Revenue Corporate Overhead Costs Most recent year $ 112,750,000 $ 10,237,500 Previous year $ 76,200,000 $ 7,921,000 Using the data in the table apply the high low method (based on revenues) to determine the variable corporate overhead costs per sales dollar. Round to the nearest 0.001.arrow_forwardPC Solutions, Inc. provides services to corporate and individual customers. During the month of June, the corporate business segment provided services to 500 customers and earned $60,000 in revenue. The individual business segment provided services to 200 customers and earned $40,000 in revenue. The variable costs for the corporate and individual business segments amounted to $33,000 and $25,000, respectively. In addition, the fixed costs of the company amounted to $7,500. Calculate the contribution margin from each customer of the individual business segment. (Round your answer to the nearest cent.) O A. $37.50 OB. $54.00 OC. $39.00 OD. $75.00arrow_forward
- Velshi Printers has contracts to complete weekly supplements required by forty - six customers. For the year 2018, manufacturing overhead cost estimates total $2,080,000 for an annual production capacity of 16 million pages. For 2018 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: Cost pool Design changes Manufacturing overhead costs Activity level 100 design changes $160,000 Setups 1,850,000 6,000 setups Inspections 70,000 9,000 inspections Total manufacturing overhead costs $2,080,000 During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: Activity Money Managers Hospital Systems Pages 90,000 106,000 Design changes Setups Inspections 12 17 26 34 Assuming activity - cost…arrow_forwardThe service department at Major Motors sold $48,000 in service last month. They had direct costs of $16,500 to pay their technicians. They were not given credit for any parts sales or expenses because that was the responsibility of their separate parts department. They were, however, allocated $29,250 in fixed expenses. What is the gross profit Major Motors earned last month?arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education