CIA Review, Inc. provides review courses twice each year for students studying to take the CIA exam. The cos included in the registration fee. Text material requires constant updating and is useful for only one course. To and ensure availability of books on the first day of class, CIA Review has books printed and delivered to its of advance of the first class. To ensure that enough books are available, CIA Review normally orders 10 percent enrollment. Usually there is an oversupply and books are thrown away. However, demand occasionally excee than 10 percent and there are too few books available for student use. CIA Review has been forced to turn aw a lack of textbooks. CIA Review expects to enroll approximately 200 students per course. The tuition fee is $2 cost of teachers is $50,000 per course, textbooks cost $150 each, and other operating expenses are estimate course. Assume all financial statements data are prepared in accordance with GAAP. Required a. Prepare an income statement, assuming that 200 students enroll in a course. Determine the cost of wast books. b-1. Prepare an income statement, assuming that 240 students attempt to enroll in the course, but 20 student because of too few textbooks. b-2. Prepare an income statement, assuming that 240 students attempt to enroll in the course, with all being b-3. Determine the amount of lost profit resulting from the inability to serve the twenty additional students.
CIA Review, Inc. provides review courses twice each year for students studying to take the CIA exam. The cos included in the registration fee. Text material requires constant updating and is useful for only one course. To and ensure availability of books on the first day of class, CIA Review has books printed and delivered to its of advance of the first class. To ensure that enough books are available, CIA Review normally orders 10 percent enrollment. Usually there is an oversupply and books are thrown away. However, demand occasionally excee than 10 percent and there are too few books available for student use. CIA Review has been forced to turn aw a lack of textbooks. CIA Review expects to enroll approximately 200 students per course. The tuition fee is $2 cost of teachers is $50,000 per course, textbooks cost $150 each, and other operating expenses are estimate course. Assume all financial statements data are prepared in accordance with GAAP. Required a. Prepare an income statement, assuming that 200 students enroll in a course. Determine the cost of wast books. b-1. Prepare an income statement, assuming that 240 students attempt to enroll in the course, but 20 student because of too few textbooks. b-2. Prepare an income statement, assuming that 240 students attempt to enroll in the course, with all being b-3. Determine the amount of lost profit resulting from the inability to serve the twenty additional students.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Complete this question by entering your answer in the tabs below.
Req A
Req B1
Req B2
Req B3
Req C
Req D1
Reg D2
Prepare an income statement, assuming that 200 students enroll in a course. Determine the cost of waste associated with
unused books.
CIA REVIEW, INC.
Income Statement
Expenses
Total expenses
$
Cost of waste associated with unused books
< Req A
Req B1
>
Transcribed Image Text:CIA Review, Inc. provides review courses twice each year for students studying to take the CIA exam. The cost of textbooks is
included in the registration fee. Text material requires constant updating and is useful for only one course. To minimize printing costs
and ensure availability of books on the first day of class, CIA Review has books printed and delivered to its offices two weeks in
advance of the first class. To ensure that enough books are available, CIA Review normally orders 10 percent more than expected
enrollment. Usually there is an oversupply and books are thrown away. However, demand occasionally exceeds expectations by more
than 10 percent and there are too few books available for student use. CIA Review has been forced to turn away students because of
a lack of textbooks. CIA Review expects to enroll approximately 200 students per course. The tuition fee is $2,000 per student. The
cost of teachers is $50,000 per course, textbooks cost $150 each, and other operating expenses are estimated to be $75,000 per
course. Assume all financial statements data are prepared in accordance with GAAP.
Required
a. Prepare an income statement, assuming that 200 students enroll in a course. Determine the cost of waste associated with unused
books.
b-1. Prepare an income statement, assuming that 240 students attempt to enroll in the course, but 20 students are turned away
because of too few textbooks.
b-2. Prepare an income statement, assuming that 240 students attempt to enroll in the course, with all being accepted.
b-3. Determine the amount of lost profit resulting from the inability to serve the twenty additional students.
c. Suppose that textbooks can be produced through a high-speed copying process that permits delivery just in time for class to start.
The cost of books made using this process, however, is $160 each. Assume that all books must be made using the same
production process. In other words, CIA Review cannot order some of the books using the regular copy process and the rest
using the high-speed process. Prepare an income statement under the JIT system assuming that 200 students enroll in a course.
d-1. Assume the same facts as in Requirement c with respect to a JIT system that enables immediate delivery of books at a cost of
$160 each. Prepare an income statement under the JIT system, assuming that 240 students enroll in a course.
d-2. Which system results in higher income?
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Introduction
An income statement is a financial statement that shows the income and expenses of a firm. It also reveals if a company is making or losing money during a given time period. The income statement, along with the balance sheet and cash flow statement, helps you understand the financial health of your organization.
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