Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 5, Problem 5.2BYP
The condensed income statement for the Peri and Paul
PERI AND PAUL COMPANY Income Statement For the Year Ended December 31, 2017
| Sales (240,000 units) | $1,200,000 | |
| Cost of goods sold | 800,000 | |
| Gross profit | 400,000 | |
| Operating expenses | ||
| Selling | $280,000 | |
| Administrative | 150,000 | 430,000 |
| Net loss | $ (30,000) |
A cost behavior analysis indicates that 75% of the cost of goods sold are variable. 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.
Instructions
(Round to nearest unit, dollar, and percentage, where necessary. Use the CVP income statement format in computing profits.)
(a) Compute the break-even point in total sales dollars and in units for 2017.
(b) Peri has proposed a plan to get the partnership “out of the red” and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Peri estimates that sales volume will increase by 25%. What effect would Peri's plan have on the profits and the break-even point in dollars of the partnership? (Round the contribution margin ratio to two decimal places.)
(c) Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Peri's: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by $0.25. and (3) increase fixed selling expenses by $40,000. Paul quoted an old
(d) Which plan should be accepted? Explain your answer.
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The condensed income statement for the Terri and Jerri partnership for 2010 is as follows.
TERRI AND JERRI COMPANY
Income Statement
For the Year Ended December 31, 2010
Sales (200,000 units)
Cost of goods sold
$1,200,000
800,000
Gross Profit
400,000
|Operating expenses
Selling
Administrative
$280,000
160,000
440,000
Net Loss
($40,000)
A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 50% of the selling
expenses are variable, and 25% of the administrative expenses are variable.
Instructions: (Round to nearest unit, dollar, and percentage, where necessary.)
(a) Compute the break-even point in total sales dollars and in units for 2010.
(b) Terri has proposed a plan to get the partnership "out of the red" and improve its profitability. She feels
that the quality of the product could be substantially improved by spending $0.25 more per unit on better
raw materials. The selling price per unit could be increased to only $6.25 because of competitive
pressures.…
The condensed income statement for the Terri and Jerri partnership for 2010 is as follows.
TERRI AND JERRI COMPANY
Income Statement
For the Year Ended December 31, 2010
Sales (200,000 units)
Cost of goods sold
$1,200,000
800,000
Gross Profit
400,000
Operating expenses
Selling
$280,000
Administrative
160,000
440,000
Net Loss
($40,000)
A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 50% of the selling
expenses are variable, and 25% of the administrative expenses are variable.
Instructions: (Round to nearest unit, dollar, and percentage, where necessary.)
(a) Compute the break-even point in total sales dollars and in units for 2010.
(b) Terri has proposed a plan to get the partnership “out of the red" and improve its profitability. She feels
that the quality of the product could be substantially improved by spending $0.25 more per unit on better
raw materials. The selling price per unit could be increased to only $6.25 because of competitive
pressures.…
The condensed income statement for the Peri and Paul partnership for 2020 is as follows.
Peri and Paul CompanyIncome StatementFor the Year Ended December 31, 2020
Sales (240,000 units)
$1,200,000
Cost of goods sold
800,000
Gross profit
400,000
Operating expenses
Selling
$280,000
Administrative
150,000
430,000
Net loss
$(30,000
)
A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.
Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Peri’s: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $40,000. Paul quoted an old…
Chapter 5 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 5 - (a) What is cost behavior analysis? (b) Why is...Ch. 5 - (a) Scott Winter asks your help in understanding...Ch. 5 - Contrast the effects of changes in the activity...Ch. 5 - J. P. Alexander claims that the relevant range...Ch. 5 - The relevant range is indispensable in cost...Ch. 5 - Prob. 6QCh. 5 - How should mixed costs be classified in CVP...Ch. 5 - At the high and low levels of activity during the...Ch. 5 - "Cost-volume-profit (CVP) analysis is based...Ch. 5 - Faye Dunn defines contribution margin as the...
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 14QCh. 5 - Define the term margin of safety. If Revere...Ch. 5 - Prob. 16QCh. 5 - Prob. 17QCh. 5 - Monthly production costs in Dilts Company for two...Ch. 5 - Prob. 5.2BECh. 5 - For Wesland Company, a mixed cost is 15,000 plus...Ch. 5 - Bruno Company accumulates the following data...Ch. 5 - Markowis Corp. has collected the following data...Ch. 5 - Determine the missing amounts.Ch. 5 - Russell Inc. had sales of 2,20O,0O0 for the first...Ch. 5 - Rice Company has a unit selling price of 520,...Ch. 5 - Presto Corp. had total variable costs of 180,000....Ch. 5 - For Flynn Company, variable costs are 70% of...Ch. 5 - Prob. 5.11BECh. 5 - Prob. 5.12BECh. 5 - Amanda Company reports the following total costs...Ch. 5 - Westerville Company accumulates the following data...Ch. 5 - Prob. 5.3DICh. 5 - Snow Cap Company has a unit selling price of 250,...Ch. 5 - Presto Company makes radios that sell for 30 each....Ch. 5 - Bonita Company manufactures a single product....Ch. 5 - Shingle Enterprises is considering manufacturing a...Ch. 5 - The controller of Norton Industries has collected...Ch. 5 - Family Furniture Corporation incurred the...Ch. 5 - The controller of Hall industries has collected...Ch. 5 - PCB Corporation manufactures a single product....Ch. 5 - Marty Moser wants Moser Company to use CVP...Ch. 5 - All That Blooms provides environmentally friendly...Ch. 5 - The Palmer Acres Inn is trying to determine its...Ch. 5 - In the month of March, Style Salon services 560...Ch. 5 - Spencer Kars provides shuttle service between four...Ch. 5 - In 2016. Manhoff Company had a break-even point of...Ch. 5 - Billings Company has the following information...Ch. 5 - Naylor Company had 210,000 of net income in 2016...Ch. 5 - Yams Company reports the following operating...Ch. 5 - Glacial Company estimates that variable costs will...Ch. 5 - Felde Bucket Co., a manufacturer of rain barrels,...Ch. 5 - Vin Diesel owns the Fredonia Barber Shop. He...Ch. 5 - Jorge Company bottles and distributes B-Lite, a...Ch. 5 - Tanek Corp.'s sales slumped badly in 2017. For the...Ch. 5 - Mary Willis is the advertising manager for Bargain...Ch. 5 - Prob. 5.5APCh. 5 - Kaiser Industries carries no inventories. Its...Ch. 5 - Bill Johnson, sales manager, and Diane Buswell,...Ch. 5 - Creative Ideas Company has decided to introduce a...Ch. 5 - The condensed income statement for the Peri and...Ch. 5 - Prob. 5.3BYPCh. 5 - Prob. 5.4BYPCh. 5 - Your roommate asks for your help on the following...Ch. 5 - Prob. 5.6BYPCh. 5 - Cost-volume-profit analysis can also be used in...
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