Blossom Company reports the following operating results for the month of August: sales $384,000 (4,800 units), variable costs$251,000, and fixed costs $96,000. Management is considering the following independent courses of action to increase net income.1. Increase the unit selling price by 15% with no change in total variable costs, fixed costs, or units sold.Reduce variable costs to 67% of sales while holding fixed costs, quantity, and unit selling price constant.2.Compute the net income to be earned under each alternative.1.2.Net incomeNet incomeWhich course of action will produce the higher net income?♥

One of the cost accounting techniques that aid in examining the effects of various cost and…

Answered: Blossom Company reports the following…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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Westerville Company reported the following results from last year’s operations: Sales $ 1,500,000 Variable expenses 690,000 Contribution margin 810,000 Fixed expenses 435,000 Net operating income $ 375,000 Average operating assets $ 1,250,000 At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics: Sales $ 420,000 Contribution margin ratio 70 % of sales Fixed expenses $ 252,000 The company’s minimum required rate of return is 10%. 1. what is the margin related to this year's investment opportunity? 2. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? 3. If Westerville’s chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?
Accents Associates sells only one product, with a current selling price of $160 per unit. Variable costs are 20% of this selling price, and fixed costs are $40,000 per month. Management has decided to reduce the selling price to $155 per unit in an effort to increase sales. Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. At the current selling price of $160 per unit, the dollar volume of sales per month necessary for Accents to break-even is: $250,000 $50,000 $40,000 Some other amount. Please answer fast i give you upvote.
Morton Company’s contribution format income statement for last month is given below: Sales (50,000 units × $ 29 per unit) $ 1,450,000 Variable expenses 1,015,000 Contribution margin 435,000 Fixed expenses 348,000 Net operating income $ 87,000 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $8.70 per unit. However, fixed expenses would increase to a total of $783,000 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 2. Refer to the income statements in…
Morton Company’s contribution format income statement for last month is given below: Sales (41,000 units × $20 per unit) $ 820,000 Variable expenses 574,000 Contribution margin 246,000 Fixed expenses 196,800 Net operating income $ 49,200 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $442,800 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 2. Refer to…
Frieden Company's contribution format income statement for the most recent month is given below: Sales (41,000 units) Variable expenses Contribution margin Fixed expenses Net operating income. $ 820,000 574,000 246,000 196,800 $ 49,200 The industry in which Frieden Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come on the market that would allow Frieden Company to automate a pation of its operations. Variable expenses would be reduced by $6.00 per unit. However, fixed expenses would increase to a total of $442,800 each month. Prepare two contribution format income statements: one showing present operations, and one showing how operations would appear if the new equipment were purchased. (Input all amounts as positive values except losses which…
Benjamin Company had the following results of operations for the past year. Sales (17,600 units at $10.00) Variable costs Direct materials Direct labor Overhead Contribution margin Fixed costs Fixed overhead Fixed selling and administrative expenses Income $ 176,000 35,200 70,400 3,520 66,880 14,080 35,200 $ 17,600 A foreign company (whose sales will not affect Benjamin's market) offers to buy 4,400 units at $7.50 per unit. In addition to variable costs, selling these units would increase fixed overhead by $660 and fixed selling and administrative costs by $330 Assuming Benjamin has excess capacity and accepts the offer, its profits will:
Data concerning Lancaster Corporation's single product appear below: Per Unit Percent of Sales Selling Price $200 100% Variable Expenses $60 30% Contribution Margin $140 70% Fixed expenses are $105,000 per month. The company is currently selling 1,000 units per month. Management is considering using a new component that would increase the unit variable cost by $44. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change? A. Decrease of $38,400 B. Decrease of $5,600 C. Increase of $38,400 D. Increase of $5,600 2.
Chandler Company sells its product for $108 per unit. Variable manufacturing costs per unit are $49, and fixed manufacturing costs at the normal operating level of 12,000 units are $240,000. Variable selling expenses are $17 per unit sold. Fixed administrative expenses total S104,000. Chandler had no beginning inventory for the year. During the year, the company produced 12,000 units and sold 9,000. Would net income for Chandler Company be higher if calculated using variable costing or using absorption costing? Calculate reported income using each method. Do not use negative signs with any answers. Absorption Costing Income Statement Sales Answer Cost of Goods Sold: Beginning Inventory Answer Variable Costs Answer Fixed Costs Answer Less: Ending Inventory Answer Cost of Goods Sold Answer Answer Answer Answer Answer Administrative expense Answer Net Income Answer Variable Costing Income Statement Sales Answer Cost of Goods Sold: Beginning Inventory Answer Variable Costs Answer Answer…
Morton Company’s contribution format income statement for last month is given below: Sales (48,000 units × $ 30 per unit) $ 1,440,000 Variable expenses 1,008,000 Contribution margin 432,000 Fixed expenses 345,600 Net operating income $ 86,400 The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $9.00 per unit. However, fixed expenses would increase to a total of $777,600 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 2. Refer to the income statements in…
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Westerville Company reported the following results from last year’s operations: Sales $ 1,500,000 Variable expenses 500,000 Contribution margin 1,000,000 Fixed expenses 700,000 Net operating income $ 300,000 Average operating assets $ 1,000,000 At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics: Sales $ 300,000 Contribution margin ratio 60 % of sales Fixed expenses $ 132,000 The company’s minimum required rate of return is 10%. What is last year’s return on investment (ROI)? If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? Westerville Company reported the following results from last year’s operations: Sales $ 1,500,000 Variable expenses 500,000 Contribution margin 1,000,000 Fixed expenses 700,000 Net operating income $ 300,000 Average operating assets $…
The following monthly data in contribution format are available for the Ross Company and its only product. Product SD: Sales Variable expenses Contribution margin Fixed expenses Net operating income Total $ $ $ $ $ 224.000 177.800 46,200 34.500 11,700 Per Unit $ 160 127 33 $ company produced and sold 1.400 units during the month and had no beginning or ending inventories, a) What is the current operating leverage? b) Projections indicate that the market will contract by 15% next month. What is the projected net operating income given this increase?

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