1.
Introduction: An income statement is a profitability statement that represents the profit position of the business for a particular period. It is a financial statement prepared at the end of the year to determine the
To prepare: The new contribution format segmented income statement.
2 (a).
Introduction: An income statement is a profitability statement that represents the profit position of the business for a particular period. It is a financial statement prepared at the end of the year to determine the profit earned or loss incurred during the period.
To explain: The reason for accepting or not the management’s plan to eliminate the cookbook.
2 (b).
Introduction: An income statement is a profitability statement that represents the profit position of the business for a particular period. It is a financial statement prepared at the end of the year to determine the profit earned or loss incurred during the period.
The contribution margin for each product line.
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Check out a sample textbook solution- O Problem Set: Module 4 1. EX.06.01 2. PR.06.02A ALGO 3. BE.06.02.ALGO 4. BE.06.03.ALGO cengagenow.com ● Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses: Selling expenses Administrative expenses Total expenses Cost of goods sold Selling expenses Administrative expenses Total variable costs Total fixed costs $16,000,000 10,600,000 Operating income The division of costs between variable and fixed is as follows: Fixed Unit variable cost Unit contribution margin + 40 Variable 70% 75% 50% $188,000,000 (101,000,000) $87,000,000 (26,600,000) $60,400,000 Management is considering a plant expansion program for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs. Required: 1. Determine the…arrow_forwardService EmphasisThe following analysis of selected data is for each of the two services Gates Corporation provides. Service A Service B Per-service data at 10,000 services Sales price $28 $24 Service costs: Variable 11 11 Fixed 6 4 Selling and administrative expenses: Variable 5 3 Fixed 3 1 In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Gates might have. Service A B Revenue Answer Answer Less: Variable cost Answer Answer Contribution margin Answer Answer Labor hours per unit Answer Answer Contribution margin per labor hour Answer Answer Any unused capacity should be devoted…arrow_forwardDraw V Type here to search Read aloud 7-2B-CVP Analysis, "What if?" Analysis Kevin Co.'s projected contribution-format income statement for the upcoming month is shown below: Sales (500 units) Variable expenses Contribution margin local or shared file Fixed expenses Net operating income $10,000 4,000 6,000 1,000 $5,000 Required: a.) Compute the breakeven point in units. b.) Compute the breakeven point in dollars. c.) If the company wishes to earn a monthly target profit of $10,000, how many units must be sold each month? d.) Compute the company's margin of safety. State your answer in both dollar and percentage terms. e.) The company's manager thinks that adding a salaried sales staff member at a cost of $2,000 per month will increase sales by $4,000 per month. If he is correct, what will be the net dollar advantage or disadvantage of making this change? f.) Refer to the original data, the company's manager believes that a new production process will improve profitability He plans to…arrow_forward
- Item 10 Required information Skip to question [The following information applies to the questions displayed below.] Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 70,000 Variable expenses 38,500 Contribution margin 31,500 Fixed expenses 23,310 Net operating income $ 8,190 10. How many units must be sold to achieve a target profit of $18,900? 12. What is the degree of operating leverage? (Round your answer to 2 decimal places.)arrow_forwardQuestion 2: Bed and Bath, a retailing company has two departments, Hardware and Linens. The company's most recent monthly contribution format income statement is given below: Department Total Hardware Linens Sales $40,00,000 $30,00,000 $10,00,000 Variable expenses 13,00,000 9,00,000 4,00,000 Contribution Margin Fixed expenses 21,00,000 14,00,000 $700,000 600,000 27,00,000 22,00,000 $5,00,000 800,000 ($200,000) Net Operating Income A study indicates that, $340,000 of the fixed expenses charged to Lines are sunk costs or allocated cost that will continue to incur even if the Linens department is dropped. In addition, the elimination of the Lines department will result in a 10% increase in the sales of the Hardware department. Required : If the Linens Department is dropped, what will be the effect on the net operating income of the company as a whole?[arrow_forward01:09:21 ook nt nces Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Required 1 Required 2 Claimjumper $ 63,900 42,600 $ 21,300 Sales Variable expenses Contribution margin Required: 1. What is the overall contribution margin (CM) ratio for the company? 2. What is the company's overall break-even point in dollar sales? 3. Prepare a contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products. Fixed expenses Net operating income (loss) Complete this question by entering your answers in the tabs below. Required 3 Makeover $21,300,000 106,500 42,600 $ Prepare a contribution format income statement at the company's break-even point that sh for the two products. (Do not round intermediate calculations. Round your answers to the r…arrow_forward
- Segment Reporting The XYZ Company produces and sells two products: The Riffs and The Raffs. Below is revenue and cost information to facilitate the development of a basic segmented income statement. Product Riffs Raffs Sales Price per unit $8.00 6.00 Variable Cost per unit $3.20 3.00 Traceable Fixed Costs $62,000 $44,000 It is expected that the company will incur $21,000 of common fixed expenses and unit sales are expected to be 12,000 of Riffs and 18,000 of Raffs. Required: Construct a Contribution Format Income Statement segmented by product line and company total.arrow_forwardQUESTION 14 THE FOLLOWING INFORMATION IS USED FOS QUESTIONS 13-19. Test Company reported the following income statement for the most recent period. Sales (8,000 units) Variable expenses Contribution margin Fixed expenses Operating income $160,000 96.000 64,000 30,000 $34.000 Determine the number of units Test Company must sell to earn operating income of $50,000. Note: Give your answer using commas. Do not include the word "units." Example: 12,345arrow_forwardp.mheducation.com 05 6 Saved Help S Whirly Corporation's contribution format income statement for the most recent month is shown below Sales (7,800 units) Variable expenses Total $ 249,600 140,400 Per Unit $ 32.00 18.00 Contribution margin 109,200 $14.00 Fixed expenses 55,600 $ 53,600 Net operating income Required: (Consider each case independently). 1. What would be the revised net operating income per month if the sales volume increases by 40 units? 2. What would be the revised net operating income per month if the sales volume decreases by 40 units? 3. What would be the revised net operating income per month if the sales volume is 6,800 units? 1. Revised net operating income 2. Revised net operating income 3 Revised net operating incomearrow_forward
- Problem 1: The IT corporation produces and markets two types of electronic calculators: Model 11 and model 12. The following data were gathered on activities last month. Model 11 Model 12 Sales in units... Selling price per unit.. Variable production costs per unit.. Traceable fixed production costs.. Variable selling expenses per unit.. Traceable fixed selling expenses....... Allocated division administrative expenses.. $50,000 Prepare a segmented income statement in the contribution format for last month 5,000 $50 $10 $100,000 $5 5,000 3,000 $100 $26 $150,000 $6 7,500 $60,000arrow_forwardQuestion Completion Status: QUESTION 7 Using the following information, calculate the monthly net profit Sales for the month Food costs 73,904 25% of Sales Labor costs 45% of Sales Rent and Insurance $1500/month Supplies $2217/month Other expenses $3791/month OA. $51,733 O B. $22,171 O C. $7508 OD. $14,663 QUESTION 8 Calculate the profit margin from the last problem O A. 17.5% OB. 19.84% OC. 18.29% Click Save and Submit to save and submit. Click Save All Answers to save all answers OD.22.22%arrow_forwardProblem 12-21 (Algo) Prepare a contribution margin format income statement; answer what-if questions LO 12-7, 12-8, 12-9 Shown here is an income statement in the traditional format for a firm with a sales volume of 7,500 units. Cost formulas also are shown: Revenues Cost of goods sold ($5,900 + $2.25/unit) Gross profit Operating expenses: Selling ($1,200 + $0.10/unit) Administrative ($3,500 + $0.20/unit) Operating income $34,400 22,775 $ 11,625 1,950 5,000 $ 4,675 Required: a. Prepare an income statement in the contribution margin format. b. Calculate the contribution margin per unit and the contribution margin ratio. c. Calculate the firm's operating income (or loss) if the volume changed from 7,500 units to 1. 11,250 units. 2. 3,750 units. d. Refer to your answer to part a for total revenues of $34,400. Calculate the firm's operating income (or loss) if unit selling price and variable expenses per unit do not change and total revenues 1. Increase by $14,500. 2. Decrease by $3,000.arrow_forward
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