Homework Answers
(a). Cost equations for compensation expenses:
|
Particulars |
=(% × sales) |
+$ |
|
Current system |
= (3% × 923,000) = 27,690 |
54,600 |
|
Salary and 5% commission |
=(5% × 1,146,000) = 57,300 |
22,300 |
|
25% commission |
=(25% × 1,346,000) = 336,500 |
0 |
(b).Statement showing profitability of different alternatives:
|
Particulars |
Current system |
Salary and 5% commission |
25% commission |
|
Sales |
923,000 |
1,146,000 |
1,346,000 |
|
Less: Cost of goods sold (30% of sales) |
276,900 |
343,800 |
403,800 |
|
Gross profit |
646,100 |
802,200 |
942,200 |
|
Less : Compensation expenses(working note 1 below) |
82,290 |
79,600 |
336,500 |
|
Net profit |
563,810 |
722,600 |
605,700 |
Working note for compensation expenses:
1.
|
Particulars |
=(% × sales) |
+$ |
Total |
|
Current system |
27,690 |
54,600 |
82,290 |
|
Salary and 5% commission |
57,300 |
22,300 |
79,600 |
|
25% commission |
336,500 |
0 |
336,500 |
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Total
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107,732
185,018
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Cost of goods sold
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108,652
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Problem 11-3
Pina Colada 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 585,500 units
of product: sales $2,927,500, total costs and expenses $3,044,600,
and net loss $117,100. Costs and expenses consisted of the amounts
shown below.
Total
Variable
Fixed
Cost of goods sold
$2,505,940
$1,861,890
$644,050
Selling expenses
292,750
107,732
185,018
Administrative expenses
245,910
79,628
166,282
$3,044,600
$2,049,250
$995,350
Management...
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...
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...
Your answer is partially correct. Try again. 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 520,500 units of product: sales $2,602,500, total costs and expenses $2,706,600, and net loss $104,100. Costs and expenses consisted of the amounts shown below. Fixed Cost of goods sold Selling expenses Administrative expenses Total $2,227,740 260,250 218,610 $2,706,600 Variable $1,655,190 95,772 70,788 $1,821,750 $572,550...
Current Attempt in Progress Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,125,600 $633,000 $492,600 Selling expenses 522,600 90,000 432,600 Administrative expenses 147,000 57,000 90,000 $1,795,200 $780,000 $1,015,200...
Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,785,000; and net loss $225,000. Costs and expenses consisted of the following: Cost of goods sold Selling expenses Administrative expenses Total Variable Fixed $1,121,600 $631,000 $490,600 511,400 92,000 419,400 152,000 57,000 95.000 $1,785,000 $780,000 $1,005,000 Management is considering the...
Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 75,000 units of product: net sales $1,500,000; total costs and expenses $1.780.200; and net loss $280,200. Costs and expenses consisted of the following Total Variable Fixed Cost of goods sold Selling expenses $1,106,000 $598,000 $508,000 522,200 95,000 427,200 152,000 57,000 95,000 $1,780,200 $750,000 $1,030,200 Administrative expenses Management is considering the...
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