EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Question
Chapter 22, Problem 4PSA
a.
To determine
Concept Introduction:
Cost volume profit analysis uses the relationship between cost, sales volume, and profit, and looks into the impact of varying levels of cost and volume on profitability. It determines the economic justification of the product manufactured.
The computation of the break-even point in dollars for the year 2020.
To determine
Concept Introduction:
Cost volume profit analysis uses the relationship between cost, sales volume, and profit, and looks into the impact of varying levels of cost and volume on profitability. It determines the economic justification of the product manufactured.
The computation of breakeven point in dollars under the given alternative course of action.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as
shown by its most recent monthly contribution format Income statement: In an effort to isolate the
problem, the president has asked for an income statement segmented by geographic market. Accordingly,
the Accounting Department has developed the following: Required: Prepare a contribution format Income
statement segmented by geographic market, as requested by the president. 2-a. The company's sales
manager believes that sales in the Central geographic market could be increased by 15% If monthly
advertising is increased by $42, 000. Calculate the incremental net operating income. 2- b. Would you
recommend the increased advertising?
Blossom Corp.’s sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 575,500 units of product: sales $2,877,500, total costs and expenses $2,984,880, and net loss $107,380. Costs and expenses consisted of the amounts shown below.
Total
Variable
Fixed
Cost of goods sold
$2,455,420
$1,887,640
$567,780
Selling expenses
287,750
105,892
181,858
Administrative expenses
241,710
78,268
163,442
$2,984,880
$2,071,800
$913,080
Management is considering the following independent alternatives for 2021.
1.
Increase unit selling price 20% with no change in costs, expenses, and sales volume.
2.
Change the compensation of salespersons from fixed annual salaries totaling $172,650 to total salaries of $69,060 plus a 4% commission on sales.
Compute the break-even point in dollars for 2020.
Break-even point
$…
The management of Your Corporation is considering dropping a product. Data from the company's accounting system appear below:
Sales
$40,000
VC
$15,000
Fixed manufacturing costs
$19,000
Fixed selling and administrative costs
$11,000
Investigation has revealed that $11,700 of the fixed manufacturing expenses and $6,300 of the fixed selling and administrative expenses will go away if the product is discontinued. What would be the effect on the company's overall net operating income if this product is dropped?
Group of answer choices
decrease by $7,000
increase by $7,000
increase by $13,000
decreased by $25,000
decreased by $13,000
Chapter 22 Solutions
EBK ACCOUNTING PRINCIPLES
Ch. 22 - Prob. 1QCh. 22 - Prob. 2QCh. 22 - Prob. 3QCh. 22 - Prob. 4QCh. 22 - Prob. 5QCh. 22 - Prob. 6QCh. 22 - Prob. 7QCh. 22 - Prob. 8QCh. 22 - 9. “Cost-volume-profit (CVP) analysis is based...Ch. 22 - Prob. 10Q
Ch. 22 - Prob. 11QCh. 22 - Prob. 12QCh. 22 - Prob. 13QCh. 22 - Prob. 14QCh. 22 - Prob. 15QCh. 22 - Prob. 16QCh. 22 - Prob. 17QCh. 22 - Prob. 20QCh. 22 - Prob. 1BECh. 22 - Prob. 2BECh. 22 - Prob. 3BECh. 22 - Prob. 4BECh. 22 - Prob. 5BECh. 22 - Prob. 6BECh. 22 - Prob. 7BECh. 22 - Prob. 8BECh. 22 - Prob. 9BECh. 22 - Prob. 10BECh. 22 - Prob. 11BECh. 22 - Prob. 12BECh. 22 - Prob. 13BECh. 22 - Prob. 1DIECh. 22 - Prob. 2DIECh. 22 - DO IT! 22-3 Cedar Grove Industries produces and...Ch. 22 - Prob. 4DIECh. 22 - Prob. 5DIECh. 22 - Prob. 1ECh. 22 - E22-2 The controller of Norton Industries has...Ch. 22 - Prob. 4ECh. 22 - Prob. 5ECh. 22 - Prob. 6ECh. 22 - Prob. 7ECh. 22 - Prob. 12ECh. 22 - Prob. 13ECh. 22 - Prob. 14ECh. 22 - Prob. 15ECh. 22 - Prob. 16ECh. 22 - Prob. 17ECh. 22 - Prob. 1PSACh. 22 - Prob. 2PSACh. 22 - Prob. 3PSACh. 22 - Prob. 4PSACh. 22 - Prob. 5PSACh. 22 - Prob. 6PSACh. 22 - Prob. 7PSACh. 22 - BYP22-1 Creative Ideas Company has decided to...Ch. 22 - Prob. 5EYCT
Knowledge Booster
Similar questions
- Pharoah Corp's sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 595,500 units of product: sales $2,977,500, total costs and expenses $3,076,750, and net loss $99,250. Costs and expenses consisted of the following amounts. Total Variable Fixed Cost of goods sold $2,528,890 $2,042.565 $486,325 Selling expenses Administrative expenses 297,750 250.110 109.572 188,178 80,988 169.122 $3,076,750 $2,233,125 $843,625 Management is considering the following independent alternatives for 2023. 1. Increase the unit selling price 25% with no change in total costs, total expenses, and sales volume 2. Change the compensation of sales personnel from fixed annual salaries totaling $178,650 to total salaries of $71,460 plus a 5% commission on sales. All other total costs, total expenses, and total sales remain unchanged. く Your answer is correct. Compute the break-even point in sales dollars for…arrow_forwardCullumber Toys' management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement, is as follows: Sales Variable expenses Contribution margin Advertising expense Depreciation expense Corporate expenses Total fixed expenses Operating income A $2,247,000 1,632,000 $615,000 $517,000 15,900 93,900 $626,800 $(11,800) B $1,404,000 600,400 $803,600 $430,000 10,000 81,600 $521,600 $282,000 C $1,809,300 1,095,200 $714,100 $520,000 20,600 105,000 $645,600 $68,500 Total $5,460,300 3,327,600 $2,132,700 $1,467,000 46,500 280,500 $1,794,000 $338,700 Advertising expense - Specific to each product. Depreciation expense - Specific to each product; no other use available, no resale value. Corporate expenses - Allocated based on number of employees.arrow_forwardMidlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 75,000 units of product: net sales $1,500,000; total costs and expenses $1,780,200; and net loss $280,200. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,106,000 $598,000 $508,000 Selling expenses 522,200 95,000 427,200 Administrative expenses 152,000 57,000 95,000 $1,780,200 $750,000 $1,030,200 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. 3. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,010 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in dollars for 2019.…arrow_forward
- esc Wildhorse Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 104,000 units of product: net sales $2,600,000; total costs and expenses $2,905,500; and net loss $305,500. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 3. Break-even point $ 1. 2. $2,038,400 Total 672,100 195,000 $2,905,500 Management is considering the following independent alternatives for 2022. 3. Purchase machinery 1 F1 Increase selling price $ Change compensation $ 72 Variable $1,365,000 Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $260,000 to total salaries of $52,000 plus a 5% commission on net sales. (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer…arrow_forwardMidlands Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 80,000 units of product: net sales $2,000,000; total costs and expenses $2,235,000; and net loss $235,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,568,000 $1,050,000 $518,000 Selling expenses 517,000 92,000 425,000 Administrative expenses 150,000 58,000 92,000 $2,235,000 $1,200,000 $1,035,000 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50arrow_forwardSuppose Grainy Day is considering discontinuing its tasty loops product line. Assume that during the past year, the tasty loops' product line income statement showed the following: A B 1 Sales revenue $7,550,000 2 Less: Cost of goods sold 6,400,000 3 Gross profit 1,150,000 4 Less: Operating expenses 1,650,000 5 Operating income (loss) $(500,000) Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the tasty loops line is just one of the company's cereal operations, only $780,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company. If the company decides to discontinue the product line, what will happen to the company's operating income? Should Grainy Day discontinue the tasty loops product line?arrow_forward
- Tanek Corp.’s sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 590,500 units of product: sales $2,952,500, total costs and expenses $3,050,875, and net loss $98,375. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of goods sold $2,507,615 $2,025,415 $482,200 Selling expenses 295,250 108,652 186,598 Administrative expenses 248,010 80,308 167,702 $3,050,875 $2,214,375 $836,500 Management is considering the following independent alternatives for 2018. 1. Increase unit selling price 25% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $177,150 to total salaries of $70,860 plus a 5% commission on sales. (a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places,…arrow_forwardMidlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,800,000; and net loss $240,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,141,200 $633,000 $508,200 Selling expenses 512,800 91,000 421,800 Administrative expenses 146,000 56,000 90,000 $1,800,000 $780,000 $1,020,000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $204,000 to total salaries of $44,985 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold…arrow_forwardCullumber Toys' management is considering eliminating product A, which has been showing a loss for several years. The company's annual income statement, is as follows: Sales Variable expenses Contribution margin Advertising expense Depreciation expense Corporate expenses Total fixed expenses Operating income (a) enses margin Direct fixed expenses rgin C $2,247.000 $1,404,000 $1,809,300 $5,460,300 1,632,000 600,400 1,095,200 3,327,600 $615,000 $803,600 $714,100 $2,132,700 $517.000 $430,000 $520,000 $1,467,000 15,900 46,500 93,900 105,000 280,500 $626,800 $645,600 $1,794,000 $(11,800) $68,500 $338,700 A Advertising expense - Specific to each product. Depreciation expense - Specific to each product; no other use available, no resale value. Corporate expenses - Allocated based on number of employees. Restate the income statement in segment margin format. Common fixed expenses 1: ofit B $ 10,000 $ 81,600 $521,600 $282,000 20,600 A Total $ Barrow_forward
- Spike Industries had a bad year in 2021, experiencing an operating loss for the first time. The company experienced sales of $2,220,000 from selling 185,000 units. The cost data can be found below: Variable Fixed S = 2.220,000 625 2,358,750 195,000 Su = $2,220,000 -112 185,000 Cost of goods sold Selling expenses VC₁ = $1,332,000 Administrative expenses 185,000 7.2 Total $1,486,000 681,000 305,000 $2,268,000 еми $866,000 356,000 110,000 $1,332,000 For 2022, management is considering changing the compensation of the sales force from fixed annual 2,75 salaries (totaling $170,006) to total salaries of $50,000 plus a 6.25% commission on sales. - $416,000 325,000 195,000 $936,000 Round to two decimal places when needed. Requirement 1: If management adopts this change, what will be the company's new break-even point in units? Is this an increase or a decrease from their previous break-even point? BE u = FC $936,000 A95,000 (12-7.2 New BEU TC -($936,000 - 120,006) $815,994 - 201,480 сти $4.05…arrow_forwardYour Company is considering discontinuing a product. Data from the company's accounting system appear below: Sales $240,000 Variable costs $101,000 Fixed manufacturing costs $ 94,000 Fixed selling & administrative costs $ 55,000 $41,000 of the fixed manufacturing expenses and $25,000 of the fixed selling and administrative expenses cannot be avoided if the product is discontinued. What would be the effect on the company's overall net operating income if the product were dropped?arrow_forwardBovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 2,070,000 Variable expenses 895,880 Contribution margin 1,174,120 Fixed expenses 1,319,000 Operating loss $ (144,880 ) In an effort to isolate the problem, the president has asked for an income statement segmented by geographic market. Accordingly, the Accounting Department has developed the following: Geographic Market South Central North Sales $ 607,000 $ 806,000 $ 657,000 Variable expenses as a percentage of sales 50 % 36 % 46 % Traceable fixed expenses $ 320,000 $ 480,000 $ 307,000 Required:1. Prepare a contribution format income statement segmented by geographic market, as requested by the president. 2-a. The company’s sales manager believes that sales in the Central…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
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:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial 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