At the end of January, ABC firm had 3,400 units in ending inventory with a total cost of $19,040. During the month of February, ABC Company produced 36,000 units and sold 34,500. For the month, the firm prepared the following contribution format income statement. Sales $307,050 Variable Manufacturing Costs 131,100 Variable S & A Costs 17,250 CM 158,700 Fixed Manufacting 81,000 Fixed S & A 54,000 NI $23,700 a) Assuming the firm has no beginning inventory, prepare a traditional format income statement for the month. b) Suppose the firm set its target net income at $50,000 per month. How many units would it have to sell in order to achieve that level of income? Assume variable costing for this problem. c) Suppose that in March the firm raises its selling price by 10% due to an increase in variable manufacturing costs of $.75 per unit. Prepare the contribution format income statement that will result. Assume no changes in other costs or unit sales.
At the end of January, ABC firm had 3,400 units in ending inventory with a total cost of $19,040. During the month of February, ABC Company produced 36,000 units and sold 34,500. For the month, the firm prepared the following contribution format income statement. Sales $307,050 Variable Manufacturing Costs 131,100 Variable S & A Costs 17,250 CM 158,700 Fixed Manufacting 81,000 Fixed S & A 54,000 NI $23,700 a) Assuming the firm has no beginning inventory, prepare a traditional format income statement for the month. b) Suppose the firm set its target net income at $50,000 per month. How many units would it have to sell in order to achieve that level of income? Assume variable costing for this problem. c) Suppose that in March the firm raises its selling price by 10% due to an increase in variable manufacturing costs of $.75 per unit. Prepare the contribution format income statement that will result. Assume no changes in other costs or unit sales.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 54E: Income Statements under Absorption and Variable Costing In the coming year, Kalling Company expects...
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At the end of January, ABC firm had 3,400 units in ending inventory with a total cost of $19,040. During the month of February, ABC Company produced 36,000 units and sold 34,500. For the month, the firm prepared the following contribution format income statement.
| Sales | $307,050 |
| Variable |
131,100 |
| Variable S & A Costs | 17,250 |
| CM | 158,700 |
| Fixed Manufacting | 81,000 |
| Fixed S & A | 54,000 |
| NI | $23,700 |
a) Assuming the firm has no beginning inventory, prepare a traditional format income statement for the month.
b) Suppose the firm set its target net income at $50,000 per month. How many units would it have to sell in order to achieve that level of income? Assume variable costing for this problem.
c) Suppose that in March the firm raises its selling price by 10% due to an increase in variable manufacturing costs of $.75 per unit. Prepare the contribution format income statement that will result. Assume no changes in other costs or unit sales.
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