EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
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Chapter 25, Problem 11BE
To determine
Introduction:
To compute: ROI and residual income.
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1. Compute the residual income for Toy investment center.
2. Compute the residual income for Shirt investment center.
Winters, Inc. is preparing financial statements to be distributed to investors and creditors. The company should prepare the income statement using
a. variable costing because it is better for planning purposes.
b. variable costing because it follows GAAP.
c. absorption costing because it is better for controlling purposes.
d. absorption costing because it follows GAAP.
APPLY THE CONCEPTS: Target income (sales revenue)
Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows:
Price and Cost Information
Amount
Selling Price per Unit
$30
Variable Cost per Unit
$15
Total Fixed Cost
$15,000
For the upcoming period, the company wishes to generate operating income of $40,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income?
Step 1: Calculate the contribution margin ratio:
The contribution margin ratio is the contribution margin in proportion to the selling price on a…
Chapter 25 Solutions
EBK ACCOUNTING PRINCIPLES
Ch. 25 - Prob. 1QCh. 25 - Prob. 2QCh. 25 - Prob. 3QCh. 25 - 4. Ken Bay questions the usefulness of a master...Ch. 25 - Prob. 5QCh. 25 - Prob. 6QCh. 25 - Prob. 7QCh. 25 - Prob. 8QCh. 25 - Prob. 9QCh. 25 - Prob. 10Q
Ch. 25 - Prob. 11QCh. 25 - Prob. 12QCh. 25 - Prob. 13QCh. 25 - Prob. 14QCh. 25 - Prob. 15QCh. 25 - Prob. 16QCh. 25 - Prob. 17QCh. 25 - Prob. 18QCh. 25 - Prob. 19QCh. 25 - Prob. 20QCh. 25 - Prob. 21QCh. 25 - Prob. 22QCh. 25 - Prob. 23QCh. 25 - Prob. 24QCh. 25 - Prob. 25QCh. 25 - Prob. 26QCh. 25 - Prob. 1BECh. 25 - Prob. 2BECh. 25 - Prob. 3BECh. 25 - Prob. 4BECh. 25 - Prob. 5BECh. 25 - Prob. 6BECh. 25 - (LO 3) Torres Company accumulates the following...Ch. 25 - Prob. 8BECh. 25 - Prob. 9BECh. 25 - Prob. 10BECh. 25 - Prob. 11BECh. 25 - Prob. 12BECh. 25 - Prob. 1DIECh. 25 - Prob. 2DIECh. 25 - Prob. 3DIECh. 25 - Prob. 4DIECh. 25 - Prob. 1ECh. 25 - E24-2 Crede Company budgeted selling expenses of...Ch. 25 - Prob. 3ECh. 25 - Prob. 4ECh. 25 - Prob. 5ECh. 25 - Prob. 6ECh. 25 - Prob. 7ECh. 25 - Prob. 8ECh. 25 - Prob. 9ECh. 25 - Prob. 10ECh. 25 - Prob. 11ECh. 25 - Prob. 12ECh. 25 - Prob. 13ECh. 25 - Prob. 14ECh. 25 - Prob. 15ECh. 25 - Prob. 16ECh. 25 - Prob. 17ECh. 25 - Prob. 18ECh. 25 - Prob. 19ECh. 25 - Prob. 20ECh. 25 - Prob. 21ECh. 25 - Prob. 1PSACh. 25 - (LO 2) Zelmer Company manufactures tablecloths....Ch. 25 - Prob. 3PSACh. 25 - Prob. 4PSACh. 25 - Prob. 5PSACh. 25 - Prob. 6PSACh. 25 - Prob. 7PSACh. 25 - Service Green Pastures is a 400-acre farm on the...Ch. 25 - Prob. 2EYCTCh. 25 - Prob. 3EYCTCh. 25 - Prob. 4EYCTCh. 25 - Prob. 5EYCTCh. 25 - Prob. 7EYCT
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- a. What is the box annual sales volume for each area to be able to compete on a competitive advantage strategy with competitors? b. What do you suggest to the company based on the cost data above for the location of its factory construction? Explain why and use the calculation data so that decision making can be in accordance with the company strategy that you have learned.arrow_forwardWinters, Inc. is preparing financial statements to be distributed to investors and creditors. The company should prepare the income statement using variable costing because it is better for planning purposes. variable costing because it follows GAAP. absorption costing because it is better for controlling purposes. absorption costing because it follows GAAP.arrow_forwardWhich of the following is NOT a period cost? Select one: O a. manufacturing costs. Ob general and administrative costs. Oc marketing costs. Od. research and development costs. Which of the following is NOT one of the questions management accountants might attempt to help answer in the formulation of strategy? Select one: a. What substitute products exist in the marketplace? Ob. Who are our most important customers? Does the strategy comply with GAAP (Generally Accepted Accounting Principles)? Od. Will adequate cash be available to implement the strategy?arrow_forward
- Which of the following is not a revenue driver factor which affects sales volume for a manufacturing firm? Multiple Choice Price changes. Customer service. Delivery dates. Productivity. Discounts.arrow_forwardTennair Corporation manufactures cooling system components. The company has gathered the following information about two of its customers: Evans Equipment and Rogers Refrigeration. Evans Equipment Sales revenue Rogers Refrigeration $ 160,000 61,000 Cost of goods sold General selling costs $ 229,000 102,000 37,000 23,800 28,500 General administrative costs 17,850 Cost-driver data used by the firm and traceable to Evans and Rogers are: Customer Activity Sales activity Order taking Special handling Special shipping Customer Activity Sales activity Order taking Special handling Special shipping Cost Driver Sales visits Sales orders Units handled Shipments Evans Equipment 12 visits 31 orders 460 units. 33 shipments Pool Rate $ 970 278 44 460 Rogers Refrigeration 9 visits 36 orders 410 units 44 shipments Required: A. Perform a customer profitability analysis for Tennair. Compute the gross margin and operating income on transactions related to Evans Equipment and Rogers Refrigeration.arrow_forwardDirection: Read carefully and answer the questions below. Encircle the letter of the correct answer. 1. Which of the following is an example of a variable cost? а. interest b. ingredients с. insurance d. lease 2. What type of cost varies depending on the quantity of products being produced? а. fixed b. net sales с. total d. variable 3. Which among the following concepts is usually seen on the top item in an income statement from which all costs and expenses is subtracted to arrive at net income? a. fixed cost b. net sales с. total cost d. variable cost 4. When do we obtain the break-even point? When the fixed cost is equal to the total cost When the total cost is equal to the variable cost When the variable cost is equal to the fixed cost d. When the number of units of goods sold covers the all the costs а. b. с. 5. Which of the following is NOT true? а. The fixed cost does not vary over time. b. The total cost is the sum of the fixed cost and the variable cost. с. The total cost is…arrow_forward
- Howard Cooper, the president of Vernon Computer Services, needs your help. He wonders about the potential effects on the firm's net income if he changes the service rate that the firm charges its customers. The following basic data pertain to fiscal Year 3. Standard rate and variable costs Service rate per hour Labor cost Overhead cost Selling, general, and administrative cost Expected fixed costs Facility maintenance Selling, general, and administrative Required A Required: a. Prepare the pro forma income statement that would appear in the master budget if the firm expects to provide 42,000 hours of services in Year 3. b. A marketing consultant suggests to Mr. Cooper that the service rate may affect the number of service hours that the firm can achieve. According to the consultant's analysis, if Vernon charges customers $83 per hour, the firm can achieve 52,000 hours of services. Prepare a flexible budget using the consultant's assumption. c. The same consultant also suggests that if…arrow_forwardHow much is the net operating income contributed to the company by Department A and B? Using the data above, what is the segment margin of Department A and B?arrow_forwardIdentify Fixed and Variable Costs Intuit Inc. develops and sells software products for the personal finance market, including popular titles such as Quickbooks® and TurboTax®. Classify each of the following costs and expenses for this company as either variable or fixed to the number of units produced and sold: a. Packaging costs b. Sales commissions c. Property taxes on general offices d. Shipping expenses e. Straight-line depreciation of computer equipment f. President’s salary g. Salaries of software developers h. Salaries of human resources personnel i. Wages of telephone order assistants j. Users' guidesarrow_forward
- The following diagram is a cost-volume-profit graph for a manufacturing company: ^ O Volume с Select the answer that best describes the labeled item on the diagram. A. Area CDE represents the area of net loss. B. Line AC graphs total fixed costs. C. Point D represents a point at which the profit is greater than zero. D. Line AC graphs total costs.arrow_forward4. What is the difference between the SCI of a service entity from a merchandising entity? 5. What is the formula in computing Net Income (Loss) for Service Entities? 6. What is the formula in computing Net Sales? 7. What is the formula in computing Cost of Goods Sold?arrow_forwardRefer to the information for Jasper Company on the previous page.Required:1. Prepare an income statement for Jasper for last year. Calculate the percentage of sales for eachline item on the income statement. (Note: Round percentages to the nearest tenth of a percent.)2. CONCEPTUAL CONNECTION Briefly explain how a manager could use the incomestatement created for Requirement 1 to better control costs.arrow_forward
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Relevant Costing Explained; Author: Kaplan UK;https://www.youtube.com/watch?v=hnsh3hlJAkI;License: Standard Youtube License