Problem 1-19 (Algo) Traditional and Contribution Format Income Statements [LO1-6] Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales $ 345,000 Beginning merchandise inventory $ 23,000 Purchases $ 230,000 Ending merchandise inventory $ 11,500 Fixed selling expense ? Fixed administrative expense $ 13,800 Variable selling expense $ 17,250 Variable administrative expense ? Contribution margin $ 69,000 ces Net operating income $ 20,700 Required: 1. Prepare a contribution format income statement. 2. Prepare a traditional format income statement. 3. Calculate the selling price per unit. 4. Calculate the variable cost per unit. 5. Calculate the contribution margin per unit. 6. Which income statement format (traditional format or contribution format) would be more useful to managers in estimating how net operating income will change in response to changes in unit sales? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 to 5 Req 6
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Problem 11-24 (Algo) Return on Investment (ROI) Analysis [LO11-1] The contribution format income statement for Huerra Company for last year is given below: Total Unit Sales $1,002,000 $50.10 Variable expenses 601,200 30.06 Contribution margin 400,800 20.04 Fixed expenses 318,800 15.94 Net operating income 82,000 4.10 Income taxes @ 40% 32,800 1.64 Net income $49,200 $2.46 The company had average operating assets of $501,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (1) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $106,000. 3. The company achieves a cost savings of $6,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $129,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $6,000 per year. 5. As a result of a more intense effort by sales people, sales are increased by 15%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $19,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $175,000 of cash (received on accounts receivable) to repurchase some of its common stock. Compute the company's margin, turnover, and return on investment (ROI) for the period. (Round your intermediate calculations and final answer to 2 decimal places.) Margin 4.91 % Turnover 2.00 ROI 9.82 %
Madhur L.
Problem 11-24 (Algo) Return on Investment (ROI) Analysis [LO11-1] The contribution format income statement for Huerra Company for last year is given below: Total Unit Sales $ 1,010,000 $ 50.50 Variable expenses 606,000 30.30 Contribution margin 404,000 20.20 Fixed expenses 322,000 16.10 Net operating income 82,000 4.10 Income taxes @ 40% 32,800 1.64 Net income $ 49,200 $ 2.46 The company had average operating assets of $493,000 during the year. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for the period. For each of the following questions, indicate whether the margin and turnover will increase, decrease, or remain unchanged as a result of the events described, and then compute the new ROI figure. Consider each question separately, starting in each case from the data used to compute the original ROI in (1) above. 2. Using Lean Production, the company is able to reduce the average level of inventory by $98,000. 3. The company achieves a cost savings of $7,000 per year by using less costly materials. 4. The company purchases machinery and equipment that increases average operating assets by $122,000. Sales remain unchanged. The new, more efficient equipment reduces production costs by $7,000 per year. 5. As a result of a more intense effort by sales people, sales are increased by 25%; operating assets remain unchanged. 6. At the beginning of the year, obsolete inventory carried on the books at a cost of $15,000 is scrapped and written off as a loss, thereby lowering net operating income. 7. At the beginning of the year, the company uses $178,000 of cash (received on accounts receivable) to repurchase some of its common stock.
Akash M.
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: Estimated Fixed Cost Estimated Variable Cost (per unit sold) Production costs: Direct materials $19 Direct labor 13 Factory overhead $230,200 10 Selling expenses: Sales salaries and commissions 47,800 4 Advertising 16,200 Travel 3,600 Miscellaneous selling expense 4,000 4 Administrative expenses: Office and officers' salaries 46,800 Supplies 5,800 2 Miscellaneous administrative expense 5,240 2 Total $359,640 $54 It is expected that 10,360 units will be sold at a price of $108 a unit. Maximum sales within the relevant range are 13,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 $ Cost of goods sold: $ Total cost of goods sold Gross profit $ Expenses: Selling expenses: $ Total selling expenses $ Administrative expenses: $ Total administrative expenses Total expenses Income from operations $ 2. What is the expected contribution margin ratio? Round to the nearest whole percent. % 3. Determine the break-even sales in units and dollars. Units units Dollars units 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $ Percentage: (Round to the nearest whole percent.) % 6. Determine the operating leverage. Round to one decimal place.
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