Homework Answers
Income statement
| Sales revenue | $2,952,509 | |
| Less: Variable costs | ||
| Variable cost of goods sold | $2,025,415 | |
| Variable selling expenses | $108,652 | |
| Variable administrative expense | $80,308 | ($2,214,375) |
| Contribution margin | $738,125 | |
| Less: Fixed costs | ||
| Fixed cost of goods sold | $482,200 | |
| Fixed selling expenses | $186,598 | |
| Fixed administrative expense | $167,702 | ($836,500) |
| Operating income ( Loss) | ($98,375) |
Break even point in dollars for 2020
Contribution margin ratio in 2020= $738,125/$2,952,500
=25%
Total fixed costs= $836,599
Break even point in dollars for 2020= $836,500/25% =$3,346,000
1.New revenue under First alternative
($2,952,500×125%) =$3,690,625
Contribution margin for the First alternative = $3,690,625-$2,214,375 = $1,476,250
Contribution margin ratio for the first alternative =$1,476,250/$3,690,625
=40%
Break Even point for First alternative =$836,500/40% =$2,091,250
Contribution margin for Second alternative =25% -5% =20%
Change in fixed annual salaries =$177,150-$70,860 =$106,290
Total fixed cost after deducting changes in Fixed salaries =$836,500-$106,290 =$730,210
Break even point for Second alternative = $730,210/20%
=$3,651,050.
Alternative 1 is recommended, since Break-even point is lower & hence less risk
____×____
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in its history, it operated at a loss. The company’s income
statement showed the following results from selling 590,500 units
of product: sales $2,952,500, total costs and expenses $3,050,875,
and net loss $98,375. Costs and expenses consisted of the amounts
shown below.
Total
Variable
Fixed
Cost of goods sold
$2,507,615
$2,025,415
$482,200
Selling expenses
295,250
108,652
186,598
Administrative expenses
248,010
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Blue Spruce Corp.’s sales slumped badly in 2017. For the first
time in its history, it operated at a loss. The company’s income
statement showed the following results from selling 590,500 units
of product: sales $2,952,500, total costs and expenses $3,070,600,
and net loss $118,100. Costs and expenses consisted of the amounts
shown below.
Total
Variable
Fixed
Cost of goods sold
$2,527,340
$1,877,790
$649,550
Selling expenses
295,250
108,652
186,598
Administrative expenses
248,010
80,308
167,702
$3,070,600
$2,066,750
$1,003,850
Management is considering...
Ivanhoe Corp's sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 515,500 units of product: sales $2,577,500, total costs and expenses$2,673,960, and net loss $96,460. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of goods sold $2,199,700 $1,690,840 $508,860 257,750 94,852 162,898 Administrative expenses 216,510 70,108 146,402 2,673,960 $1,855,800 $818,160 Selling expenses Management is considering the following...
Tanek Corp.’s sales slumped badly in 2017. For the first time in
its history, it operated at a loss. The company’s income statement
showed the following results from selling 540,500 units of product:
sales $2,702,500, total costs and expenses $2,810,600, and net loss
$108,100. Costs and expenses consisted of the amounts shown
below.
Total
Variable
Fixed
Cost of goods sold
$2,313,340
$1,718,790
$594,550
Selling expenses
270,250
99,452
170,798
Administrative expenses
227,010
73,508
153,502
$2,810,600
$1,891,750
$918,850
Management is considering the...
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