Transcript
Jonathan Maloy
Accounting Assignment
Question 1
Tanner Company's most recent contribution format income statement is presented below:
Note: Contribution margin =.40 Variable expenses = 60% of sales
There was no beginning or ending inventories.
Required:
a. Compute the company's break-even point in sales revenue.
(36,000+0)/ (30,000) =1.2 Break even in units
1.2*75,000= 90,000 Break-even point in sales revenue
b. Compute the total variable expenses at the break-even point.
1.2X45,000=54,000
c. What are the sales revenues needed to earn a target profit of $9,000?
36000+9000/30000=1.5
1.5X75,000=112,500
d. The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay?
75,000+25,000=100,000
45,000/75,000=.6
Sales=$100,000
VC= $60,000
CM-$40,000
AE =$6,000
GM =$34,000
FE=$36,000
N.O.I.=$-2,000
He is correct. Variable expenses are 60% of the sales. So 6,000 isn’t much because only 24% of cost increases of sales of 25,000 so it would be worth a shot.
Question 2
Zins Corporation produces and sells a single product. The company's contribution format income statement for August appears below:
Required:
Redo the company's contribution format income statement assuming that the company sells 1,400 units.
95,000/1,000=95
Sales (1,400 units)= $133,000
Variable expenses= $92,400
Contribution Margin=$ 40,600
Fixed expenses=$ 23,800
Net Operating Income=$16,800
Question 3
Legaard Corporation produces and sells a single product. Data concerning that product appear below:
Fixed expenses are $220,000 per month. The company is currently selling 4,000 units per month.
4000X170=680000 Sales
102X4000=408000 Variable Expense
68X4000=272000 Contribution Margin
220000 Fixed Expense
Net Operating Income= -220000
Required:
The marketing manager would like to cut the selling price by $15 and increase the advertising budget by $11,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,500 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!
Sales= 155X5500=852500
Variable Expense= 102X5500=561000
Advertising Expense= 11000
Contribution Margin= 280500
Fixed Expenses= 220000
Net Operating Income= 60500
This would greatly affect how the company is doing business this investment would greatly benefit the company.
Question 4
Akerley, Inc., produces and sells a single product. The product sells for $140.00 per unit and its variable expense is $42.00 per unit. The company's monthly fixed expense is $393,960.
Fixed Expense= 393960
Product Sells= 140 per unit
Variable Expense is 42 per unit
Contribution Margin would be 98 per unit
Required: This one confuses me because doesn’t specific how many units were sold using the formula got 393960/98= 4020 for the break even point and know that the value sounds wrong?????
Determine the monthly break-even in unit sales. Show your work!
?
Question 5
The following is Alsatia Corporation's contribution format income statement for last month:
The company has no beginning or ending inventories and produced and sold 10,000 units during the month.
Required:
a. What is the company's contribution margin ratio?
Sales 1400000- Variable Expenses – 900000= 500000 which is the total contribution margin so the ratio would be 14:5.
b. What is the company's break-even in units?
Fixed Expense 300000/Contribution Margin 500000= .6
.6X14000000=840000 breakeven point in sales revenue.
c If sales increase by 100 units, by how much should net operating income increase?
100X140=14000+14000000=1401400 sales
90x100=9000+900000= 909000= Variable Expenses
14014000-909000=492400 gross margin
30X100=3000+3000000=303000 Fixed Expenses
492400-303000=189,400 net income
d. How many units would the company have to sell to attain target profits of $225,000?
300,000/(225000+500000) 300000/725000=.414
.414X14000000=579600
e. What is the company's margin of safety in dollars?
189,400 because that is the net income that we calculated????
f. What is the company's degree of operating leverage?
The degree of operating leverage would be 200,000?????
Kind of confused on these last 2.
