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1. ABC Company sells a single product, has provided its contribution format income statement for June. Contribution Income Statement Sales (10,000 units) Variable expenses Contribution Margin Fixed expenses 100,000 60,000 40,000 ....... 30,000 Net Operating Income 10.000 Required: ABC is considering focusing on using a higher quality material which will increase variable costs. Specifically, the higher priced material will increase variable costs by 10%, and cost accountants estimate the higher quality will result in higher sales by $5,000. Prepare Contribution Income Statement which details the changes in net operating income. (4 marks) a.

1. ABC Company sells a single product, has provided its contribution format income statement for June. Contribution Income Statement Sales (10,000 units) Variable expenses Contribution Margin Fixed expenses 100,000 60,000 40,000 ....... 30,000 Net Operating Income 10.000 Required: ABC is considering focusing on using a higher quality material which will increase variable costs. Specifically, the higher priced material will increase variable costs by 10%, and cost accountants estimate the higher quality will result in higher sales by $5,000. Prepare Contribution Income Statement which details the changes in net operating income. (4 marks) a.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Solve 2 questions. Question 1 , you have to solve part a and part b . Question 2 , you have to solve part a and part b . Solve all of them with steps. Thank you.
1. ABC Company sells a single product, has provided its contribution format income statement for June. Contribution Income Statement Sales (10,000 units) Variable expenses ... Contribution Margin Fixed expenses 100,000 60,000 40,000 30,000 Net Operating Income 10,000 Required: a. ABC is considering focusing on using a higher quality material which will increase variable costs. Specifically, the higher priced material will increase variable costs by 10%, and cost accountants estimate the higher quality will result in higher sales by $5,000. Prepare Contribution Income Statement which details the changes in net operating income. (4 marks) b. Another accountant proposes using a cheaper material. The new material will decrease variable costs 20%, but management expects the lower quality will reduce sales by $15,00. Prepare Contribution Income Statement assuming which details the changes in net operating income. (4 marks)
Transcribed Image Text:1. ABC Company sells a single product, has provided its contribution format income statement for June. Contribution Income Statement Sales (10,000 units) Variable expenses ... Contribution Margin Fixed expenses 100,000 60,000 40,000 30,000 Net Operating Income 10,000 Required: a. ABC is considering focusing on using a higher quality material which will increase variable costs. Specifically, the higher priced material will increase variable costs by 10%, and cost accountants estimate the higher quality will result in higher sales by $5,000. Prepare Contribution Income Statement which details the changes in net operating income. (4 marks) b. Another accountant proposes using a cheaper material. The new material will decrease variable costs 20%, but management expects the lower quality will reduce sales by $15,00. Prepare Contribution Income Statement assuming which details the changes in net operating income. (4 marks)
2. The following information was provided by XYZ Company for the current year: Number of units 1,000 Selling price Variable cost $10 $6 Fixed expenses $2,000 Calculate Break-even point in sales quantity. (1 mark) a. b. Calculate Break-even point in sales dollars. (1 mark)
Transcribed Image Text:2. The following information was provided by XYZ Company for the current year: Number of units 1,000 Selling price Variable cost $10 $6 Fixed expenses $2,000 Calculate Break-even point in sales quantity. (1 mark) a. b. Calculate Break-even point in sales dollars. (1 mark)
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