For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions): Sales $14,100 Food and packaging $5,994 Payroll 3,600 Occupancy (rent, depreciation, etc.) 1,986 General, selling, and administrative expenses 2,100 $13,680 Income from operations $420 Assume that the variable costs consist of food and packaging; payroll; and 40% of the general, selling, and administrative expenses. a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) million b. What is Wicker Company's contribution margin ratio? Round your answer to one decimal place. % c. How much would income from operations increase if same-store sales increased by $800 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. million

For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions): Sales $14,100 Food and packaging $5,994 Payroll 3,600 Occupancy (rent, depreciation, etc.) 1,986 General, selling, and administrative expenses 2,100 $13,680 Income from operations $420 Assume that the variable costs consist of food and packaging; payroll; and 40% of the general, selling, and administrative expenses. a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) million b. What is Wicker Company's contribution margin ratio? Round your answer to one decimal place. % c. How much would income from operations increase if same-store sales increased by $800 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. million

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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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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 $ 4,280,000 1,305,000 2,975,000 2,310,000 $ 665,000 Department Hardware $3,130,000 893,000 2,237,000 1,420,000 $ 817,000 Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Linens $ 1,150,000 412,000 738,000 890,000 $ (152,000) 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 14% decrease in the sales of the Hardware Department.
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales ($62 per unit) Cost of goods sold (@ $32 per unit) Gross margin Selling and administrative expenses* Net operating income Year 1 $ 1,178,000 Year 2 $ 1,798,000 608,000 928,000 570,000 870,000 303,000 333,000 $ 267,000 537,000 * $3 per unit variable; $246,000 fixed each year. The company's $32 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($288,000 + 24,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: Units produced Units sold Required: Year 1 24,000 19,000 Year 2 24,000 29,000 12 832 $ 32 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating…
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Sales (@ $63 per unit) Cost of goods sold (@ $35 per unit) Gross margin Selling and administrative expenses* Net operating income * $3 per unit variable; $255,000 fixed each year. Year 1 $ 1,071,000 Year 2 $1,701,000 595,000 945,000 476,000 306,000 336,000 $170,000 $420,000 The company's $35 unit product cost is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead ($418,000 + 22,000 units) Absorption costing unit product cost Production and cost data for the first two years of operations are: 756,000 $ 6 19 $ 35 Units produced Units sold Year 1 22,000 Year 2 22,000 17,000 27,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating…
A retailing company has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Total Department Hardware Linens Sales $ 4,070,000 $ 3,000,000 $ 1,070,000 Variable expenses 1,350,000 950,000 400,000 Contribution margin 2,720,000 2,050,000 670,000 Fixed expenses 2,320,000 1,470,000 850,000 Net operating income (loss) $ 400,000 $ 580,000 $ (180,000) A study indicates $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 20% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Note* The answer is not $23,900
During Denton Company’s first two years of operations, the company reported absorption costing net operating income as follows:Year 1 Year 2Sales (@ $63 per unit) year 1$ 1,260,000 year 2 $ 1,890,000 Cost of goods sold (@ $35 per unit) year 1. $700,000 year 2.$1,050,000 Gross margin year 1$560,000 year 2 $840,000 Selling and administrative expenses*year 1 $312,000 year 2 $342,000 Net operating incomeyear 1$ 248,000 year 2$ 498,000 $3 per unit variable; $252,000 fixed each year.The company’s $35 unit product cost is computed as follows:Direct materials $ 7 Direct labor $8 Variable manufacturing overhead $3 Fixed manufacturing overhead ($425,000 ÷ 25,000 units) $17 Absorption costing unit product cost $ 35 Production and cost data for the two years are given below: Year 1 Year 2Units produced $25,000 $25,000Units sold. $20,000 $30,000 Prepare a variable costing contribution format income statement for each year. Reconcile the absorption costing and…
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ 1,159,000 $ 1,769,000 Cost of goods sold (@ $34 per unit) 646,000 986,000 Gross margin 513,000 783,000 Selling and administrative expenses* 305,000 335,000 Net operating income $ 208,000 $ 448,000 * $3 per unit variable; $248,000 fixed each year. The company’s $34 unit product cost is computed as follows: Direct materials $ 7 Direct labor 13 Variable manufacturing overhead 2 Fixed manufacturing overhead ($288,000 ÷ 24,000 units) 12 Absorption costing unit product cost $ 34 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 24,000 24,000 Units sold 19,000 29,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the…
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ 976,000 $ 1,586,000 Cost of goods sold (@ $38 per unit) 608,000 988,000 Gross margin 368,000 598,000 Selling and administrative expenses* 299,000 329,000 Net operating income $ 69,000 $ 269,000 * $3 per unit variable; $251,000 fixed each year. The company’s $38 unit product cost is computed as follows: Direct materials $ 7 Direct labor 12 Variable manufacturing overhead 4 Fixed manufacturing overhead ($315,000 ÷ 21,000 units) 15 Absorption costing unit product cost $ 38 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 21,000 21,000 Units sold 16,000 26,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3.…
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,100 kayaks and sold 850 at a price of $1,100 each. At year-end, the company reported the following income statement information using absorption costing. Sales (850 × $1,100) $ 935,000 Cost of goods sold (850 × $425) 361,250 Gross profit 573,750 Selling and administrative expenses 220,000 Income $ 353,750 Additional Information a. Product cost per kayak under absorption costing totals $425, which consists of $325 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $110,000 of fixed overhead per year divided by 1,100 kayaks produced.b. The $220,000 in selling and administrative expenses consists of $85,000 that is variable and $135,000 that is fixed.Prepare an income statement for the current year under variable costing.
During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $61 per unit) $ 1,098,000 $ 1,708,000 Cost of goods sold (@ $36 per unit) 648,000 1,008,000 Gross margin 450,000 700,000 Selling and administrative expenses* 305,000 335,000 Net operating income $ 145,000 $ 365,000 * $3 per unit variable; $251,000 fixed each year. The company’s $36 unit product cost is computed as follows: Direct materials $ 7 Direct labor 9 Variable manufacturing overhead 2 Fixed manufacturing overhead ($414,000 ÷ 23,000 units) 18 Absorption costing unit product cost $ 36 Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 23,000 23,000 Units sold 18,000 28,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3.…
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 $ 4,160,000 1,252,000 2,908,000 2,280,000 $ 628,000 Department Hardware $ 3,140,000 849,000 2,291,000 1,400,000 $ 891,000 Linens $ 1,020,000 403,000 617,000 880,000 $ (263,000) A study indicates that $373,000 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 16% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department?
Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,025 kayaks and sold 775 at a price of $1,025 each. At year-end, the company reported the following income statement information using absorption costing. Sales (775 × $1,025) $ 794,375 Cost of goods sold (775 × $500) 387,500 Gross profit 406,875 Selling and administrative expenses 250,000 Income $ 156,875 Additional Information a. Product cost per kayak under absorption costing totals $500, which consists of $400 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $102,500 of fixed overhead per year divided by 1,025 kayaks produced.b. The $250,000 in selling and administrative expenses consists of $105,000 that is variable and $145,000 that is fixed.Prepare an income statement for the current year under variable costing.