Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 3.35E
Contribution margin, decision making. Welch Men’s Clothing’s revenues and cost data for 2017 are as follows:
| Revenues | $600,000 | |
| Cost of goods sold (all variable costs) | 300,000 | |
| Gross margin | 300,000 | |
| Operating costs: | ||
| Salaries fixed | $140,000 | |
| Sales commissions (12% of sales) | 72,000 | |
| Depreciation of equipment and fixtures | 10,000 | |
| Store rent ($3,500 per month) | 42,000 | |
| Other operating costs | 45,000 | 309,000 |
| Operating income (loss) | $ (9,000) |
Mr. Welch, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 variable costs, which vary with sales volume, and $15,000 (fixed) costs.
- 1. Compute the contribution margin of Welch Men’s Clothing.
Required
- 2. Compute the contribution margin percentage.
- 3. Mr. Welch estimates that he can increase units sold, and hence revenues by 25% by incurring additional advertising costs of $8,000. Calculate the impact of the additional advertising costs on operating income.
- 4. What other actions can Mr. Welch take to improve operating income?
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3-22 Contribution margin, decision making. (LO 2) Welch Men's Clothing's
revenues and cost data for 2021 are as follows:
Revenues
Cost of goods sold (all variable costs)
Gross margin
Operating costs:
Salaries fixed
Sales commissions (12% of sales)
Depreciation of equipment and fixtures
Store rent ($3,500 per month)
Other operating costs
Operating income (loss)
$140,000
72,000
10,000
42,000
45,000
$600,000
300,000
300,000
309,000
$ (9,000)
Mr. Welch, the owner of the store, is unhappy with the operating results. An
analysis of other operating costs reveals that it includes $30,000 variable costs,
which vary with sales volume, and $15,000 (fixed) costs.
Required
1. Compute the contribution margin of Welch Men's Clothing.
2. Compute the contribution margin percentage.
3. Mr. Welch estimates that he can increase units sold, and hence revenues
by 25%, by incurring additional advertising costs of $8,000. Calculate the
impact of the additional advertising costs on operating income.
4. What…
1).
Zen Company
Income Statement
For the month ended September 30, 2020
Sales
$750,000
Cost of good sold
Gross margin
Selling and Administration expense:
Selling expenses
Administration expense
(660,000)
90,000
20,000
10,000
(30,000)
60.000
Net operating income
Zen company sell its shoes for $750 per pair. The variable expense to produce shoes is $350 per pair. The full admin
cost is variable. In terms of selling expenses, the sales commission per pair is $ 5 and the remaining are the fixed
salaries of sales people.
Requirement
a. Prepare a contribution format income statement. Find the contribution of each pair of shoes toward covering
fixed cost.
The contribution margin income statement of Unique Donuts for August 2024 follows:
(Click the icon to view the contribution margin income statement.)
Data table
Unique Donuts
Contribution Margin Income Statement
Month Ended August 31, 2024
Net Sales Revenue
Variable Costs:
Cost of Goods Sold
Selling Costs
Administrative Costs
Contribution Margin
Fixed Costs:
Selling Costs
Administrative Costs
Operating Income
$
32,300
17,200
1,300
42,210
14,070
$
$
-
127,000
50,800
76,200
56,280
19,920
Requirements
Unique sells two dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts
sells for $3.10, with total variable cost of $1.24 per dozen. A dozen custard-filled donuts sells for
$7.20, with total variable cost of $2.88 per dozen.
d-filled donuts
1. Calculate the weighted-average contribution margin.
2. Determine Unique's monthly breakeven point in dozens of plain donuts and
custard-filled donuts. Prove your answer by preparing a summary contribution
margin income…
Chapter 3 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 3 - Define costvolumeprofit analysis.Ch. 3 - Describe the assumptions underlying CVP analysis.Ch. 3 - Distinguish between operating income and net...Ch. 3 - Prob. 3.4QCh. 3 - Prob. 3.5QCh. 3 - Why is it more accurate to describe the subject...Ch. 3 - CVP analysis is both simple and simplistic. If you...Ch. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Give an example of how a manager can decrease...
Ch. 3 - Give an example of how a manager can increase...Ch. 3 - What is operating leverage? How is knowing the...Ch. 3 - There is no such thing as a fixed cost. All costs...Ch. 3 - Prob. 3.14QCh. 3 - In CVP analysis, gross margin is a less-useful...Ch. 3 - Jacks Jax has total fixed costs of 25,000. If the...Ch. 3 - During the current year, XYZ Company increased its...Ch. 3 - Under the contribution income statement, a...Ch. 3 - A company needs to sell 10,000 units of its only...Ch. 3 - Once a company exceeds its breakeven level,...Ch. 3 - Prob. 3.21ECh. 3 - CVP computations. Garrett Manufacturing sold...Ch. 3 - CVP analysis, changing revenues and costs. Sunset...Ch. 3 - CVP exercises. The Deli-Sub Shop owns and operates...Ch. 3 - CVP exercises. The Doral Company manufactures and...Ch. 3 - CVP analysis, income taxes. Westover Motors is a...Ch. 3 - CVP analysis, income taxes. The Home Style Eats...Ch. 3 - CVP analysis, sensitivity analysis. Perfect Fit...Ch. 3 - CVP analysis, margin of safety. Suppose Morrison...Ch. 3 - Operating leverage. Cover Rugs is holding a 2-week...Ch. 3 - CVP analysis, international cost structure...Ch. 3 - Sales mix, new and upgrade customers. Chartz 1-2-3...Ch. 3 - Prob. 3.33ECh. 3 - Prob. 3.34ECh. 3 - Contribution margin, decision making. Welch Mens...Ch. 3 - Contribution margin, gross margin, and margin of...Ch. 3 - Uncertainty and expected costs. Kindmart is an...Ch. 3 - CVP analysis, service firm. Lifetime Escapes...Ch. 3 - CVP, target operating income, service firm....Ch. 3 - CVP analysis, margin of safety. Marketing Docs...Ch. 3 - CVP analysis, income taxes. (CMA, adapted) J.T....Ch. 3 - CVP, sensitivity analysis. The Derby Shoe Company...Ch. 3 - CVP analysis, shoe stores. The HighStep Shoe...Ch. 3 - CVP analysis, shoe stores (continuation of 3-43)....Ch. 3 - Prob. 3.45PCh. 3 - Prob. 3.46PCh. 3 - CVP analysis, income taxes, sensitivity. (CMA,...Ch. 3 - Choosing between compensation plans, operating...Ch. 3 - Prob. 3.49PCh. 3 - Multiproduct CVP and decision making. Crystal...Ch. 3 - Sales mix, two products. The Stackpole Company...Ch. 3 - Prob. 3.52PCh. 3 - Ethics, CVP analysis. Megaphone Corporation...Ch. 3 - Deciding where to produce. (CMA, adapted) Portal...
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