a. Prepare a contribution margin income statement that summarizes the dealership’s projected operating income. b. Calculate...
a. Prepare a contribution margin income statement that summarizes the dealership’s projected operating income.
b. Calculate the dealership’s projected break-even point in terms of total revenue (total revenue will equal the sum of product sales revenue and repair services revenue). Calculate the dealership’s margin of safety.
c. Assume that the dealership operates under the projections that were initially outlined with the exception of a change in compensation structure for sales personnel. Brad and Lewis intend to eliminate the base salaries for the dealership’s sales personnel and increase their commission to 30% of sales. Prepare a contribution margin statement based upon the modified compensation structure and calculate the company’s new break-even point in terms of total revenue.
Financial Projection Assumptions:
Projected number of motorcycles sold per year: 150
Projected number of snowmobiles sold per year: 125
Projected number of ATVs sold per year: 100
Projected average retail price of each motorcycle: $8,000
Projected average retail price of each snowmobile: $6,000
Projected average retail price of each ATV: $5,000
Projected total annual repair service revenue: $70,000
Variable Costs:
Projected average cost of each motorcycle: $4,000
Projected average cost of each snowmobile: $4,500
Projected average cost of each ATV: $3,500
Sales commissions: 20% of retail product sales
Payroll taxes: 12% of sales commissions paid
Supplies: 10% of repair service revenue
Fixed Costs:
Advertising $24,000
Alarm services fee $1,000
Bank fees $2,400
Cleaning service $3,200
Depreciation $6,000
Dues and subscriptions $1,000
Store manager salary $40,000
Sales personnel base salaries $24,000
Mechanic's annual salary $40,000
Payroll taxes 12% of payroll
Insurance $4,000
Miscellaneous $1,000
Legal and professional fees $4,000
Office supplies and postage $2,000
Payroll service fees $2,000
Rent $16,000
Telephone $1,000
Training and education $2,000
Utilities $6,000
Homework Answers
| a) | Contribution Margin Income Statement | |||||
| Motorcycle | Snowmobiles | ATVs | Repair | Total | ||
| Sales | 1200000 | 750000 | 500000 | 70000 | 2520000 | |
| Less : Variable Expenses | ||||||
| Cost of Sales | ||||||
| Motorcycle ( 150 units * $ 4,000 ) | 600000 | 600000 | ||||
| Snowmobiles ( 125 units * $ 4,500 ) | 562500 | 562500 | ||||
| ATVs ( 100 units * $ 3,500 ) | 350000 | 350000 | ||||
| Sales Commision ( @ 20% ) | 240000 | 150000 | 100000 | 490000 | ||
| Payroll Taxes ( 12 % of Commission ) | 28800 | 18000 | 12000 | 58800 | ||
| Supplies ( 10% of repair revenue ) | 7000 | 7000 | ||||
| Contribution Margin | 451700 | |||||
| Less : Fixed cost | ||||||
| Advertisement | 24000 | |||||
| Alarm service fees | 1000 | |||||
| Bank Fees | 2400 | |||||
| Cleaning service | 3200 | |||||
| Depreciation | 6000 | |||||
| Dues and Subscription | 1000 | |||||
| Store Manager Salary | 40000 | |||||
| Sales personnel base salaries | 24000 | |||||
| Mechanic's annual salary | 40000 | |||||
| Payroll taxes ( 12% * ( Store manager salary + Sales personnel salary + mechanic's annual salary ) | 12480 | |||||
| Insurance | 4000 | |||||
| Miscellaneous | 1000 | |||||
| Legal and professional fees | 4000 | |||||
| Office supplies and postage | 2000 | |||||
| Payroll service fees | 2000 | |||||
| Rent | 16000 | |||||
| Telephone | 1000 | |||||
| Training and education | 2000 | |||||
| Utilities | 6000 | |||||
| Net Operating Income | 259620 | |||||
| * | Sales Revenue= Number of units sold * Retail price per unit | |||||
| b) | Break even Point = Total fixed cost / Contribution Margin Ratio | |||||
| Contribution Margin ratio = Total contrbution / Total Revenue * 100 | ||||||
| = 451,700 / 2,520,000 * 100 | ||||||
| = 17.92% | ||||||
| Break Even Point = $ 192,080 / 17.92% | ||||||
| = $ 1,071,875 | ||||||
| Margin of safety = Actual Sales - Break Even sales | ||||||
| = $2,520,000 - 41,071,875 | ||||||
| = $ 1,448,125 | ||||||
| c) | Contribution Margin Income Statement | |||||
| Motorcycle | Snowmobiles | ATVs | Repair | Total | ||
| Sales | 1200000 | 750000 | 500000 | 70000 | 2520000 | |
| Less : Variable Expenses | ||||||
| Cost of Sales | ||||||
| Motorcycle ( 150 units * $ 4,000 ) | 600000 | 600000 | ||||
| Snowmobiles ( 125 units * $ 4,500 ) | 562500 | 562500 | ||||
| ATVs ( 100 units * $ 3,500 ) | 350000 | 350000 | ||||
| Sales Commision ( @ 30% ) | 360000 | 225000 | 150000 | 735000 | ||
| Payroll Taxes ( 12 % of Commission ) | 43200 | 27000 | 18000 | 88200 | ||
| Supplies ( 10% of repair revenue ) | 7000 | 7000 | ||||
| Contribution Margin | 177300 | |||||
| Less : Fixed cost | ||||||
| Advertisement | 24000 | |||||
| Alarm service fees | 1000 | |||||
| Bank Fees | 2400 | |||||
| Cleaning service | 3200 | |||||
| Depreciation | 6000 | |||||
| Dues and Subscription | 1000 | |||||
| Store Manager Salary | 40000 | |||||
| Mechanic's annual salary | 40000 | |||||
| Payroll taxes ( 12% * ( Store manager salary + mechanic's annual salary ) | 9600 | |||||
| Insurance | 4000 | |||||
| Miscellaneous | 1000 | |||||
| Legal and professional fees | 4000 | |||||
| Office supplies and postage | 2000 | |||||
| Payroll service fees | 2000 | |||||
| Rent | 16000 | |||||
| Telephone | 1000 | |||||
| Training and education | 2000 | |||||
| Utilities | 6000 | |||||
| Net Operating Income | 12100 | |||||
| Break even Point = Total fixed cost / Contribution Margin Ratio | ||||||
| Contribution Margin ratio = Total contrbution / Total Revenue * 100 | ||||||
| = 177,300 / 2,520,000 * 100 | ||||||
| = 7.04% | ||||||
| Break Even Point = $ 12,100 / 7.04% | ||||||
| = $ 171,875 | ||||||
Add Answer to:
a. Prepare a contribution margin income statement that
summarizes the dealership’s projected operating
income.
b. Calculate...
Exercise 2-13A Using contribution margin format income statement to measure the magnitude of operating leverage The...
Exercise 2-13A Using contribution margin format income statement to measure the magnitude of operating leverage The following income statement was drawn from the records of Joel Company, a merchandising firm: JOEL COMPANY Income Statement For the Year Ended December 31, 2018 Sales revenue (2,000 units x $125) Cost of goods sold (2,000 units x $65) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (2,000 units x $1.00) Net income $...
prepare a projected income statement for 2019, based on the patterns in the years 2015 through 2018 Income Statem...
prepare a projected income statement for 2019, based on the
patterns in the years 2015 through 2018
Income Statement 2015 $78,000 $40,000 $38,000 For Year Ended 2016 2017 $52,000 $41,000 $45.000 $38,000 $7,000 $3,000 2018 $36,000 $40,000 ($4,000) $3,000 $2,000 $0 $0 Sales LESS Cost of Goods Sold Gross Profit LESS Marketing Expenses LESS Gn'l & Admin Expenses LESS Depreciation Operating Profit LESS Interest Expense Profit Before Taxes LESS Taxes Net Profit $1,000 $10.000 $24,000 $1,000 $23,000 $9.200 $13,800 $1,000...
Exercise 19-8 Contribution margin format income statement LO P2 Polarix Is a retailer of ATVs (all-terrain...
Exercise 19-8 Contribution margin format income statement LO P2 Polarix Is a retailer of ATVs (all-terrain vehicles) and accessories. An Income statement for its Consumer ATV Department for the ent year follows. ATVs sell for $4,000 each. Variable selling expenses are $320 per ATV. The remaining selling expenses are fix Administrative expenses are 70% variable and 30% fixed. The company does not manufacture its own ATVs, It purchases them from a supplier for $1,920 each. POLARIX Income Statement-Consumer ATV Department...
Please show work. Thank you Group Problem 3 Contribution Margin Format Income Statement Morrisey & Brown...
Please show work. Thank you
Group Problem 3 Contribution Margin Format Income Statement Morrisey & Brown Ltd, of Sydney, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the three most recent months follow. Type July 4,000 Aug 4,500 Sept 5,000 Sales in units Sales Revenue Less Cost of Goods Sold Gross Margin $400,000 240,000 $450,000 270.000 $500,000 300,000 $160,000 $180,000 $200,000 Less Operating...
points) Below is the adjusted trial balance for Baba Repair Service. Please prepare the income statement...
points) Below is the adjusted trial balance for Baba Repair Service. Please prepare the income statement for the December 31, 2012. Baba Repair Service Adjusted Trial Balance December 31, 2012 Debit Credit $1,600 2,400 800 200 14,000 Accounts Cash Accounts receivable Prepaid rent Supplies Building Accumulated depreciation Accounts payable Salary payable Unearned revenue D. Baba, capital D. Baba, drawing Service revenue Salary expense Rent expense Depreciation expense Supplies expense Total $2,000 4,200 1,000 800 6,000 1,000 50,000 121.000 114,000 8.500...
Given the following contribution income statement, how much contribution margin must this company have in order...
Given the following contribution income statement, how much contribution margin must this company have in order to cover its fixed costs (i.e. break even)? Total Unit Sales Revenue ( 1,000 units) $100,000 $100 Variable Expenses 60,000 60 Contribution Margin $ 40,000 $ 40 Fixed Expenses 36,000 Operating Income $ 4,000 a. $44,000 O b. $36,000 c. $4,000 d. $76,000 e. $40,000
Megalopolis Bank has the following balance sheet and income statement. For Megalopolis, calculate: Return on...
Megalopolis Bank has the following balance sheet and income
statement.
For Megalopolis, calculate:
Return on equity
Return on assets
Asset utilization
Equity multiplier
Profit margin
Interest expense ratio
Provision for loan loss ratio
Noninterest expense ratio
Tax ratio
Balance Sheet (in millions) Assets Liabilities and Equity Cash and due Demand from banks $ 9,000 deposits $ 19,000 Investment securities 23,000 NOW accounts 89,000 Repurchase agreements 42,000 Retail CDs 28,000 Loans 90,000 Debentures 19,000 Fixed assets 15,000 Total liabilities $155,000...
Question #4-9 Contribution margin... Fixed expenses... Operating income..... 38.000 SI0.000 Required: 1. Compute the company's degree...
Question #4-9
Contribution margin... Fixed expenses... Operating income..... 38.000 SI0.000 Required: 1. Compute the company's degree of operating leverage. 2. Using the degree of operating leverage, estimate the impact on operating income of a 5% increase in sales 3. Verify your estimate from (2) above by constructing a new contribution format income statement for the company, assuming a 5% increase in sales. EXERCISE 1-9 Compute the Break-Even Point for a Multi-Service Company: Compute Sales for a Target Profit L06, L09]...
P5.5A An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that...
P5.5A An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that has been in business for a number of years. Prepare a correct multiple-step income statement. Simon Company Income Statement For the Year Ended December 31, 2022 Revenues Net sales $850,000 Other revenues 22,000 872,000 Cost of goods sold 555,000 Gross profit 317,000 Operating expenses Selling expenses 109,000 Administrative expenses 103,000 212,000 Net earnings $105,000 As an experienced, knowledgeable accountant, you review the statement and...
Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result...
Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result from the production and sale of 4,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $250 each. The company has a 25% income tax rate. $ 68,000 328,000 104,000 60,000 Variable production costs Plastic for casing Wages of assembly workers Drum stands Variable selling costs Sales commissions Fixed manufacturing costs Taxes on factory...
Exercise 2-13A Using contribution margin format income statement to measure the magnitude of operating leverage The following income statement was drawn from the records of Joel Company, a merchandising firm: JOEL COMPANY Income Statement For the Year Ended December 31, 2018 Sales revenue (2,000 units x $125) Cost of goods sold (2,000 units x $65) Gross margin Sales commissions (10% of sales) Administrative salaries expense Advertising expense Depreciation expense Shipping and handling expenses (2,000 units x $1.00) Net income $...
prepare a projected income statement for 2019, based on the
patterns in the years 2015 through 2018
Income Statement 2015 $78,000 $40,000 $38,000 For Year Ended 2016 2017 $52,000 $41,000 $45.000 $38,000 $7,000 $3,000 2018 $36,000 $40,000 ($4,000) $3,000 $2,000 $0 $0 Sales LESS Cost of Goods Sold Gross Profit LESS Marketing Expenses LESS Gn'l & Admin Expenses LESS Depreciation Operating Profit LESS Interest Expense Profit Before Taxes LESS Taxes Net Profit $1,000 $10.000 $24,000 $1,000 $23,000 $9.200 $13,800 $1,000...
Exercise 19-8 Contribution margin format income statement LO P2 Polarix Is a retailer of ATVs (all-terrain vehicles) and accessories. An Income statement for its Consumer ATV Department for the ent year follows. ATVs sell for $4,000 each. Variable selling expenses are $320 per ATV. The remaining selling expenses are fix Administrative expenses are 70% variable and 30% fixed. The company does not manufacture its own ATVs, It purchases them from a supplier for $1,920 each. POLARIX Income Statement-Consumer ATV Department...
Please show work. Thank you
Group Problem 3 Contribution Margin Format Income Statement Morrisey & Brown Ltd, of Sydney, is a merchandising firm that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the three most recent months follow. Type July 4,000 Aug 4,500 Sept 5,000 Sales in units Sales Revenue Less Cost of Goods Sold Gross Margin $400,000 240,000 $450,000 270.000 $500,000 300,000 $160,000 $180,000 $200,000 Less Operating...
points) Below is the adjusted trial balance for Baba Repair Service. Please prepare the income statement for the December 31, 2012. Baba Repair Service Adjusted Trial Balance December 31, 2012 Debit Credit $1,600 2,400 800 200 14,000 Accounts Cash Accounts receivable Prepaid rent Supplies Building Accumulated depreciation Accounts payable Salary payable Unearned revenue D. Baba, capital D. Baba, drawing Service revenue Salary expense Rent expense Depreciation expense Supplies expense Total $2,000 4,200 1,000 800 6,000 1,000 50,000 121.000 114,000 8.500...
Given the following contribution income statement, how much contribution margin must this company have in order to cover its fixed costs (i.e. break even)? Total Unit Sales Revenue ( 1,000 units) $100,000 $100 Variable Expenses 60,000 60 Contribution Margin $ 40,000 $ 40 Fixed Expenses 36,000 Operating Income $ 4,000 a. $44,000 O b. $36,000 c. $4,000 d. $76,000 e. $40,000
Megalopolis Bank has the following balance sheet and income
statement.
For Megalopolis, calculate:
Return on equity
Return on assets
Asset utilization
Equity multiplier
Profit margin
Interest expense ratio
Provision for loan loss ratio
Noninterest expense ratio
Tax ratio
Balance Sheet (in millions) Assets Liabilities and Equity Cash and due Demand from banks $ 9,000 deposits $ 19,000 Investment securities 23,000 NOW accounts 89,000 Repurchase agreements 42,000 Retail CDs 28,000 Loans 90,000 Debentures 19,000 Fixed assets 15,000 Total liabilities $155,000...
Question #4-9
Contribution margin... Fixed expenses... Operating income..... 38.000 SI0.000 Required: 1. Compute the company's degree of operating leverage. 2. Using the degree of operating leverage, estimate the impact on operating income of a 5% increase in sales 3. Verify your estimate from (2) above by constructing a new contribution format income statement for the company, assuming a 5% increase in sales. EXERCISE 1-9 Compute the Break-Even Point for a Multi-Service Company: Compute Sales for a Target Profit L06, L09]...
Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result from the production and sale of 4,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $250 each. The company has a 25% income tax rate. $ 68,000 328,000 104,000 60,000 Variable production costs Plastic for casing Wages of assembly workers Drum stands Variable selling costs Sales commissions Fixed manufacturing costs Taxes on factory...
Most questions answered within 3 hours.
-
the following reaction occurs in a balloon containing
N2O2 gas
N2O4(g)=2NO2(g)
will the volume of the...
asked 1 minute from now -
answer the questions throughout this program
public class Day implements Comparable {
Private Boolean atWork;...
asked 6 minutes ago -
This is C++ code for parking fee management program
#include <iostream>
#include <iomanip>
using namespace std;...
asked 17 minutes ago -
The free energy change for the following reaction at 25 °C, when
[Sn2+] = 1.17 M...
asked 2 hours ago -
An MNE is this kind of industry when competition in one country
is essentially independent of...
asked 3 hours ago -
. For this set of questions, determine what
proportion of a normal distribution is located betweeneach...
asked 4 hours ago -
A college student is employed as a door-to-door newspaper
salesman. Historical data suggests that the student...
asked 5 hours ago -
MATLAB HW 11 problem using Switch Case and Input commands
Write a script file that calculates...
asked 4 hours ago -
Considering gravitational time dilation, calculate the time that
passes in Earth’s surface while 1 hour passes...
asked 5 hours ago -
Minitab Problem: Take the Lake Hume June rainfall data and find
use the processes outlined in...
asked 6 hours ago -
X Company is trying to decide whether to continue using old
equipment to make Product A...
asked 6 hours ago -
IN PYTHON ONLY !! Program 2: Re-work
program #5 (WeeklyHours) from the previous assignment such that...
asked 6 hours ago