3-22 Contribution margin, decision making. (LO 2) Welch Men's Clothing'srevenues and cost data for 2021 are as follows:RevenuesCost of goods sold (all variable costs)Gross marginOperating costs:Salaries fixedSales commissions (12% of sales)Depreciation of equipment and fixturesStore rent ($3,500 per month)Other operating costsOperating income (loss)$140,00072,00010,00042,00045,000$600,000300,000300,000309,000$ (9,000)Mr. Welch, the owner of the store, is unhappy with the operating results. Ananalysis of other operating costs reveals that it includes $30,000 variable costs,which vary with sales volume, and $15,000 (fixed) costs.Required1. Compute the contribution margin of Welch Men's Clothing.2. Compute the contribution margin percentage.3. Mr. Welch estimates that he can increase units sold, and hence revenuesby 25%, by incurring additional advertising costs of $8,000. Calculate theimpact of the additional advertising costs on operating income.4. What other actions can Mr. Welch take to improve operating income?

According to the question given, we need to compute the contribution margin and operating income.…

Answered: 3-22 Contribution margin, decision…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Owe Subject: accounting
ceive full credit you must show your as a template. Practice Problems 1)Corp sells several products. Information on average revenue and costs is as follows: Selling price per unit $28.50 Variable costs per unit: Direct material $5.50 Direct manufacturing labor $1.15 Manufacturing overhead $0.85 Selling costs $2.50 $125,000 ulations Annual fixed costs How much is operating income if the company sells 15,000 units? 2) If the company decides to lower its selling price by 10%, the operating income is reduced by how r hour: firm (this is conceptually similar to the O/H allocation year 2015, O/H cost estimates total $840,000 for an 2015, it decided to evaluate the use of additional ined that number of design changes, setups, and llowing information was gathered during the analysis: S 0 ! Activity level 300 design changes 5,000 setups 8,000 inspections pital Systems, are expected to use the following lospital Systems 76,000 0 10 38 e O/H cost estimate for Money Managers for a deluxe model.…
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Submit A retailer has two departments-Home and Garden. The company's most recent contribution format income statement follows: Total Home Garden Sales $৪00, 000 $350,000 $450,000 Variable expenses 320,000 120,000 200,000 Contribution margin Fixed expenses 480,000 230,000 250,000 400,000 140,000 260,000 35:51 Net operating income (1loss) $ 80,000 $ 90,000 $(10,000) The retailer is considering whether It should close the Garden Department. Further analysis revealed that, of the fixed expenses being charged to the Garden Department, $140,000 are sunk costs or allocated costs that will continue If Garden is discontinued. In addition, If the Garden Department is discontinued, sales in the Home Department will drop by 5%. How much does the company's profit increase or decrease if the Garden Department is discontinued? (If a decrease, the dollar amount is indicated in parentheses, ie., $ (1,000).) Multiple Cholce $ (124,000) O Quiz $ (161,500) 1009
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Fixed expenses Contribution margin Net operating income (loss) 1,307,000 Department Total $ 4,210,000 Hardware $ 3,040,000 Linens $ 1,170,000 403,000 767,000 840,000 $ (73,000) 2,903,000 2,290,000 $ 613,000 904,000 2,136,000 1,450,000 $ 686,000 A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 15% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage)
Contribution Margin and Contribution Margin Ratio For a recent year, McDonald's (MCD) company-owned restaurants had the following sales and expenses (in millions): Sales Food and packaging Payroll Occupancy (rent, depreciation, etc.) General, selling, and administrative expenses $18,700 $(7,497) (4,700) (3,243) (2,700) $(18,140) Operating income Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses. a. What is McDonald's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) million b. What is McDonald's contribution margin ratio? % $560 c. How much would operating income increase if same-store sales increased by $1,100 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. million
Tike Industries is an apparel company that makes and sells both casual wear and sportswear. Here are data for the current year: Sales revenue Variable costs Contribution margin Traceable fixed costs Segment margin Common fixed costs Operating income Total $ 1,000,000 745,000 $255.000 (80,000) $175,000 (90,000) $85,000 Casual wear $ 450,000 388,000 $62,000 (25,000) $37,000 (42,000) S(5,000) Sportswear 5 pts $ 550,000 357,000 $193,000 (55,000) $138,000 (48,000) $90,000 Tike's accountant allocated the common fixed costs between the product lines based on sales revenue. Tike plans to discontinue the production of casual wear and use the freed-up capacity to triple the production and sale of sportswear. Although this will eliminate the traceable fixed costs for casual wear, the traceable fixed costs for sportswear will double. If Tike discontinues the casual wear product line, what would be the amount of the increase in Tike's operating income? Round to the nearest whole dollar and do not…
Contribution margin and contribution margin ratio For a recent year, McDonald's (MCD) company-owned restaurants had the following sales and expenses (in millions): Sales Food and paper D Payroll and employee benefits Occupancy and other expenses General, selling, and administrative expenses million $19,207.8 $(2,564.2) (2,416.4) (4,357.6) (2,545.6) Operating income Assume that the variable costs consist of food and paper, payroll, 25% of occupancy and other expenses, and 40% of the general, selling, and administrative expenses. a. What is McDonald's contribution margin? Round to the nearest tenth of a million (one decimal place). $(11,883.8) $7,324.0 b. What is McDonald's contribution margin ratio? Round to one decimal place. % million How much would operating income increase if same-store sales lecreased by $800 million for the coming year, with no change in the contribution margin ratio or fixed costs? Re decimal place).
Use the marginal income ratio to calculate the break-even value. INFORMATIONSamcor Limited manufactures tables. The following information was extracted from the budget for the year ended 30 June 2022:1. Total production and sales 2 400 units2. Selling price per table R1 2003. Variable manufacturing costs per table:Direct material R288Direct labour R192Overheads R964. Fixed manufacturing overheads R216 9605. Other costs:Fixed marketing and administrative costs R144 000Sales commission 5%
A28
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,310,000 1,313,000 2,997,000 2,200,000 $ 797,000 Department Hardware $ 3,130,000 901,000 2,229,000 1,360,000 $ 869,000 Linens $ 1,180,000 412,000 768,000 840,000 $ (72,000) A study indicates that $377,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 11% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage)

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