Homework Answers
Q18.
Answer is "B"
High operating leverage structure determines that income is sensitive and proportional to increase in revenues.
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QUESTION 16 A company has high operating leverage when: A small percentage changes in revenue produce...
ACCT 2301 Operating Leverage Handout #8 d cot ha Contribution margin income statements for two competing...
ACCT 2301 Operating Leverage Handout #8 d cot ha Contribution margin income statements for two competing companies are provided below: Anthe Alpha Cempany Revenue Less variable costs Contribution margin Less fixed costs Net income Gamma Company $500,000 200.000 $300,000 270.000 $30,000 $500,000 350,000 $150,000 120.000 $30,000 Required: 1) Show each company's cost structure by inserting the percentage of the company's revenue represented by each item on the contribution income statement: Alpha Company $500,000 200,000 $300,000 Gemma Company $s00.000 350,000 $150,000...
QUESTION 27 When sales dollars increase, the net income of a company with a high degree...
QUESTION 27 When sales dollars increase, the net income of a company with a high degree of operating leverage will increase more quickly than in a company with a lower operating leverage. However, when sales dollars decrease, the net income of a company with a high degree of operating leverage will decrease more quickly than in a company with a lower operating leverage. True O False QUESTION 28 Jen & Berry's currently sells 100,000 pints of ice cream per month...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Skin Crean 136,000 Relevant Information B ath 011 216,000 Color Gel 96.000 Budgeted sales in units (a) Expected sales price (b) Variable costs per unit...
Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats...
Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is cunently produces and sells 75.000 seats per year The following irnformation relates to curent production of seats Sale price per unit S420 Variable costs per unit Manufacturing Makeling and administrative $220 560 Tetal feed costs Manufacturing Marketing and administrative $780 000 $250 000 Ya special sales order is accepted for 3,400 seats at a price of 5310 per unt, and...
Exercise 6-9 Compute and Use the Degree of Operating Leverage (LO6-8) Engberg Company installs lawn sod...
Exercise 6-9 Compute and Use the Degree of Operating Leverage (LO6-8) Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 121,000 48,400 72,600 22,000 $ 50, 600 Percent of Sales 1009 404 604 Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a...
Problem 4-27 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO4, LOS, LOO,...
Problem 4-27 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO4, LOS, LOO, LOT, LO8] Frieden Company's contribution format income statement for last month is shown below: Sales (30,000 units) Variable expenses $1,050,000 630,000 Contribution margin Fixed expenses 420,000 378,000 Operating income 42.000 bok Ask Competition is intense, and Frieden Company's profits vary considerably from one year to the next. Management is exploring opportunities to increase profitability. Print Required: 1. Frieden's management is considering a major upgrade...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Baird Company is considering the addition...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Baird Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual Income statements for each of the products follow Relevant Information Skin Cream b ath Oil Color Gel 104,000 184,000 64,000 Budgeted sales in unita (a) Expected sales price (b) Variable costs per unit...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Stuart Company is considering the addition...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Stuart Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Relevant Information Bath Oil Skin Cream Budgeted sales in 132,000 units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Skin Cream 135.ee Relevant Taformation b ath Cole 216,000 Budgeted sales in units (a) Expected sales price (1) Variable costs per unit (c) Income statements...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Gibson Company is considering the addition...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Gibson Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Relevant Information Bath Oil Skin Cream 116,000 Color Gel Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements...
ACCT 2301 Operating Leverage Handout #8 d cot ha Contribution margin income statements for two competing companies are provided below: Anthe Alpha Cempany Revenue Less variable costs Contribution margin Less fixed costs Net income Gamma Company $500,000 200.000 $300,000 270.000 $30,000 $500,000 350,000 $150,000 120.000 $30,000 Required: 1) Show each company's cost structure by inserting the percentage of the company's revenue represented by each item on the contribution income statement: Alpha Company $500,000 200,000 $300,000 Gemma Company $s00.000 350,000 $150,000...
QUESTION 27 When sales dollars increase, the net income of a company with a high degree of operating leverage will increase more quickly than in a company with a lower operating leverage. However, when sales dollars decrease, the net income of a company with a high degree of operating leverage will decrease more quickly than in a company with a lower operating leverage. True O False QUESTION 28 Jen & Berry's currently sells 100,000 pints of ice cream per month...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Skin Crean 136,000 Relevant Information B ath 011 216,000 Color Gel 96.000 Budgeted sales in units (a) Expected sales price (b) Variable costs per unit...
Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is cunently produces and sells 75.000 seats per year The following irnformation relates to curent production of seats Sale price per unit S420 Variable costs per unit Manufacturing Makeling and administrative $220 560 Tetal feed costs Manufacturing Marketing and administrative $780 000 $250 000 Ya special sales order is accepted for 3,400 seats at a price of 5310 per unt, and...
Exercise 6-9 Compute and Use the Degree of Operating Leverage (LO6-8) Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 121,000 48,400 72,600 22,000 $ 50, 600 Percent of Sales 1009 404 604 Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a...
Problem 4-27 Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO4, LOS, LOO, LOT, LO8] Frieden Company's contribution format income statement for last month is shown below: Sales (30,000 units) Variable expenses $1,050,000 630,000 Contribution margin Fixed expenses 420,000 378,000 Operating income 42.000 bok Ask Competition is intense, and Frieden Company's profits vary considerably from one year to the next. Management is exploring opportunities to increase profitability. Print Required: 1. Frieden's management is considering a major upgrade...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Baird Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual Income statements for each of the products follow Relevant Information Skin Cream b ath Oil Color Gel 104,000 184,000 64,000 Budgeted sales in unita (a) Expected sales price (b) Variable costs per unit...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Stuart Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Relevant Information Bath Oil Skin Cream Budgeted sales in 132,000 units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Skin Cream 135.ee Relevant Taformation b ath Cole 216,000 Budgeted sales in units (a) Expected sales price (1) Variable costs per unit (c) Income statements...
Problem 11-29 Margin of safety and operating leverage LO 11-6 Gibson Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow Relevant Information Bath Oil Skin Cream 116,000 Color Gel Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements...
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