1. The following CVP income statements are available for ABC Company and XYZ Company. АВС Соmpany XYZ Company CVP I/S for 2020 CVP I/S for 2020 Sales $500,000 300,000 200,000 180,000 $ 20,000 $500,000 Variable costs 180,000 320,000 300,000 $ 20,000 Contribution margin Fixed costs Operating income (a) Compute the break-even point in dollars and the margin of safety ratio for each company. (b) Compute the degree of operating leverage for each company. (c) Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company.

1. The following CVP income statements are available for ABC Company and XYZ Company. АВС Соmpany XYZ Company CVP I/S for 2020 CVP I/S for 2020 Sales $500,000 300,000 200,000 180,000 $ 20,000 $500,000 Variable costs 180,000 320,000 300,000 $ 20,000 Contribution margin Fixed costs Operating income (a) Compute the break-even point in dollars and the margin of safety ratio for each company. (b) Compute the degree of operating leverage for each company. (c) Assuming that sales revenue decreases by 20%, prepare a CVP income statement for each company.

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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The single-column CVP income statements shown below are available for Wildhorse Company and Blossom Company, Sales Variable costs Contribution margin Fixed costs Net income Wildhorse Wildhorse Co. Blossom $495,000 239,000 256,000 1000 156,000 $100,000 Blossom Co. Degree of Operating Leverage $495,000 (a1) Compute the degree of operating leverage for each company. (Round answers to 2 decimal places, e.g. 1.15.) $ 51,000 444,000 344,000 $100,000 (b) Assuming that sales revenue increases by 10% (due to a 10% increase in the number of units sold), prepare a single-plumn CVP income statement for each company. Wildhorse Company $ tA $ Blossom Company
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The following CVP income statements are available for Wildhorse Corp. and Blossom, Inc. Wildhorse Corp. Blossom, Inc. Sales revenue $854,000 $854,000 * Variable costs 396,500 228,750 Contribution margin 457,500 625,250 Fixed costs 305,000 472,750 Net income $152,500 $152,500 (a) Compute the degree of operating leverage for each company. (Round answers to 1 decimal place, e.g. 15.5.) Degree of Operating Leverage Wildhorse Blossom
Mairy Productions has three models: D, E, and F. The following information is available Model D 100.000 $37,000 $32,000 $20.000 $12,000 Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) Model E $37,000 $14,000 $23.000 $20,000 $3,000 A. Increase $13,000 OB. Decrease $13,000 OC. Increase $18,000 OD. Decrease $18,000 Model F $24,000 $14.000 $10,000 $20,000 ($10,000) Maizy Productions is thinking of discontinuing model F because it is reporting an operating loss. All fixed costs are unavoidable. Assuming Maizy Productions discontinues fine F and is able to double the production and sales of model E without increasing fixed costs. What effect will this have on operating income?